With 2020 just around the corner, it pays to look ahead and think about what shares might perform well in the new year. Below, I have listed 1 ASX growth share and 1 ASX dividend share that I believe have the potential for market-beating returns in 2020.
Growth: Audinate Group LTD (ASX: AD8)
The Audinate share price is already up 125.56% YTD, however I believe it may have the steam to continue this run higher throughout 2020 and beyond.
Audinate is the leading provider of professional digital audio networking technologies globally. Its Dante platform allows distribution of uncompressed, multi-channel digital media over standard ethernet networks with near zero latency. This brings the benefits of IT networking to the professional AV industry and means heavy expensive cabling is no longer required.
In the recent financial year, Audinate delivered 34% revenue growth, which, when converted to AUD from USD meant a 44% increase, thanks to the falling Australian dollar.
The company believes one of its biggest obstacles to the adoption of Dante is training. It has responded by developing courses available to professionals in the AV industry to take face-to-face or online. This training has the added benefit that most professionals have been found to purchase more Dante-enabled products, post training.
Audinate's share of the audio market is currently estimated at only 7%. This leaves plenty of room for further growth, which will be funded through Audinate's recent capital raising. This shows Audinate is investing for long-term growth – the company is looking to double its engineering and R&D functions over the next 2 years and expand its total addressable market with the addition of video and software products.
Dividends: Rural Funds Group (ASX: RFF)
An important consideration in buying shares for dividend income is the sustainability of the dividend and whether the company has the ability to grow the dividend over time. I believe Rural Funds ticks both of these boxes.
Rural Funds owns 50 diversified high quality Australian agricultural assets, which it leases to operators. It has a stated goal of increasing dividend payments by 4% each year, which it achieves partially through the indexation built into its lease agreements. Rural Funds currently has a dividend payout ratio of 78%, which also leaves it cash to continue growing its asset portfolio. It has also already announced a forecast dividend of 10.85 cents to be paid in 2020, which is consistent with its 4% growth in dividend and means it will be providing a forward dividend yield of just over 6%.
This yield is larger now than in the recent past, due to the decline in RFF's share price from its high of $2.42 in July to the $1.78 per share it closed at today. This drop is due to short seller attacks, which management have repeatedly defended. If investors believe management, this means they can pick the shares up today for around their net asset value – a price that RFF shares have historically traded at a decent premium to.
Foolish takeaway
I think both Audinate and Rural Funds have a good chance of outperforming the market next year. Additionally, if management is telling the truth and Rural Funds is not hiding any skeletons, I think today's price would offer investors a great dividend yield as well as some decent price growth in 2020.
