There are few shares on the ASX that could be described as a ‘must-have’ in every portfolio.
But I think there are a few, high-quality options that could be worth a spot in every place. They have to display capital growth qualities, pay at least something of a dividend, have plans for dividend growth, be fairly defensive and have good leadership.
Here are three of my ideas:
Altium Limited (ASX: ALU)
Altium is one of the highest-quality businesses on the ASX, perhaps the world, in my opinion. Its electronic PCB software is heavily linked to the rise of the Internet of Things. The company is seeing more subscribers, higher profit margins, growing cashflow, a strengthening balance sheet and a wider service offering to clients.
Companies need to continue to pay for the software to develop the products and machinery of the future. Altium keeps growing its dividend, it remains debt free and it has an excellent management team.
I want to stay invested to at least 2025 and ride the wave of higher subscribers and higher revenue. However, its dividend yield is currently below 1%.
Magellan Global Trust (ASX: MGG)
We can’t directly get access to the world’s best businesses on the ASX, shares like Microsoft, Alphabet, LVMH, Facebook, Visa, MasterCard and others are listed overseas. We should all want investment exposure to these types of businesses.
Magellan Global Trust is a listed investment trust (LIT) and it’s invested in the highest-quality businesses in the world that have long-term growth expectations, strong economic moats, fairly defensive earnings and very effective management.
Whilst its returns are reduced by fees, Magellan Global Trust has proven to be a strong performer since it listed in October 2019 with an average net return per annum of 16.6%. It targets 4% distribution yield, so it has a fairly attractive distribution yield as well.
Future Generation Investment Company Ltd (ASX: FGX)
Future Generation is a listed investment company (LIC). Not every investment has to be the best performing business to be worth investing in.
The reason why I think everyone should own a bit of Future Generation is that it donates 1% of its net assets each year to youth charities. That’s something that every investor can get behind, I think.
There’s more to Future Generation than just the donations. Its money is invested in the funds of ASX-focused fund managers who work for free for Future Generation. There are no management fees or performance fees. Many of the service providers also provide services for free.
However, Future Generation does intend to make a profit for its shareholders. The investment returns that Future Generation generates are partly paid to shareholders in the form of growing fully franked dividends, whilst the rest is retained for future growth.
Since inception in September 2014, Future Generation’s portfolio has made an average gross return of 9.5% per annum, outperforming the S&P/ASX All Ordinaries Accumulation Index’s return of 8.2% per annum.
Future Generation currently offers a grossed-up dividend yield of 6%.
I think all three of these shares have a great chance of beating the market over the next few years, particularly Magellan Global Trust because of its diversification and global focus.
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Motley Fool contributor Tristan Harrison owns shares of Altium, FUTURE GEN FPO, and MAGLOBTRST UNITS. The Motley Fool Australia owns shares of Altium. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.