Are you currently retired or approaching retirement soon and looking for a way to get some extra income? Or maybe you’re still working but would like to top up your wage with an additional income stream?
Either way, in my view, shares that pay attractive dividend yields are a much better strategy than keeping your money in a savings account or term deposit. Often, the interest you get from them doesn’t even cover inflation.
So with that being said, I don’t think you can go past these two ASX shares as long-term investments over the next decade.
Carsales.Com Ltd (ASX: CAR)
The local online car classifieds provider released its FY20 half-year earnings to the market on Wednesday. The company recorded adjusted net profit after tax (NPAT) of $63 million, up 7% for the period. Revenue increased 5% to $214 million, while earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 6% to $107 million.
These results were very well received by the market, with the Carsales share price rocketing 8.3% higher on the day.
The company has demonstrated it can continue to build on its entrenched and dominant position in Australia, providing a protective moat against any market competition, while also very aggressively growing its presence overseas.
Carsales’ growth has been very impressive over the past four years, especially for a company with a relatively mature business model. Between H1 FY16 and H1 FY20, the company’s revenue has increased at a compound annual growth rate (CAGR) of 12%, while adjusted EBITDA has increased at a CAGR of 9% over the same period.
Carsales’ growing international operations continues to be a key driver of growth, and now represent 23% of look-through revenue and 18% of look-through EBITDA.
Carsales shares are trading on a trailing dividend yield of 2.5% at the time of writing, fully franked, which is very good for an ASX growth share.
Telstra Corporation Ltd (ASX: TLS)
Australia’s largest telecommunications provider, Telstra, currently pays an appealing trailing dividend yield of 4.2%, fully franked.
In the telco’s latest round of results released to the market this week, Telstra reported total income of $13,413 million for the six months ended December 31. This represents a 2.8% decline on the prior corresponding period (pcp).
However, the company appears to be still on track to strip out a total of $2.5 billion in costs by 2022, with underlying fixed costs reduced by $422 million or 12.1% during the half. This latest reduction takes Telstra’s total underlying fixed cost reductions to around $1.6 billion since FY 2016.
The leading telco has been undergoing significant short-term pain as it restructures into a leaner company to remain in its dominant number 1 market position.
Telstra needs to go further than just cost-cutting and restructuring if it is to significantly grow its business over the longer term. Launching new 5G services is a key driver to achieve this. 5G has the potential to offer even faster broadband speeds than the NBN, providing Telstra with a real opportunity to also gain new mobile broadband subscribers from dissatisfied NBN customers.
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Motley Fool contributor Phil Harpur owns shares of carsales.com Limited and Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended carsales.com Limited. 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.