The ASX is a wonderful place to find shares that offer a combination of growth and income.
Some shares offer bond-like returns with no growth but decent income, however this doesn't lead to much compounding.
Some shares offer lots of growth such as A2 Milk Company Ltd (ASX: A2M) but don't pay a dividend (though that may change in the next few years for A2 Milk).
However, there are a select group of shares that offer a good amount of growth and dividends such as:
Magellan Financial Group Ltd (ASX: MFG)
Magellan is arguably the best fund manager in Australia, which is why the company has attracted so much funds under management. Almost every month it's getting closer to managing $100 billion.
A fund manager doesn't really need any extra capital to grow bigger. The same portfolio manager and financial software can be used to manage $2.2 billion or $2 billion. Therefore, as FUM and fees grow, most of the money can be paid to shareholders as dividends. It also pays out dividends from any outperformance fees.
Magellan has a mostly-franked, grossed-up dividend yield of around 3.8%. As FUM grows the ordinary dividend will undoubtedly keep growing.
Bapcor Ltd (ASX: BAP)
Bapcor is the largest auto parts business in Australasia. It owns various successful chains of businesses including Burson, Autobarn and various other wholesalers such as electrical.
Not only does Bapcor have a pretty generous dividend payout ratio, but the market has generally priced Bapcor with a relatively low price/earnings ratio, which gives it a better dividend yield too.
Bapcor is generating attractive same store sale growth at Burson, it regularly acquires bolt-on acquisitions which diversifies earnings and opens up new growth avenues. It's also starting to grow a Burson network in Asia.
In FY20 Bapcor expects to grow net profit by at least mid single digits, which should support another year of decent dividend growth.
It currently has a grossed-up dividend yield of 3.75%.
Brickworks Limited (ASX: BKW)
Brickworks is a leading building products business.
Its large, long-term investment in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and the 50% stake in the industrial property trust alongside Goodman Group (ASX: GMG) are two sources of steady growth and good cashflow for Brickworks.
When you look at the growth potential of its Australian and US building products businesses you can see a lot of opportunity. Australian cities continue to grow at a fast pace and the US market is huge. New buildings, renovations and repairs are all good sources of earnings for Brickworks, even in a downturn.
Brickworks is steadily growing its earnings and dividend, the grossed-up dividend yield is currently 4.1%.
Foolish takeaway
All three of these businesses have been great investments over the past five years. I'd be happy to buy all three, though Magellan is probably a bit expensive and Bapcor's long-term growth may not be too strong because of electrical vehicles (which need less parts etc), therefore Brickworks would be my preferred long-term pick today.
