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3 ASX 200 shares to buy for income and growth

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S&P/ASX 200 Index (ASX: XJO) shares can be a good source of income and growth.

Businesses can reach a point where they don’t need to invest as much for growth if they’re already in a strong market position, so they’re able to send some of the profit to shareholders in the form of dividends.

I think dividends are a good sign that an ASX 200 share is profitable and that management have a focus on rewarding shareholders.

Here are three of the ASX 200 shares I’d consider for growth and income:

Share 1: Bapcor Ltd (ASX: BAP)

Bapcor is Australia’s leading automotive parts business. It runs a variety of parts brands such as Burson which supplies auto parts to mechanics – this is the main profit generator for Bapcor. It also runs Autobarn, ABS, Midas and a number of specialist wholesalers including ones focused on truck parts. I like how it’s diversified across several areas of the auto industry. 

The COVID-19 shutdown was obviously bad news for the ASX 200 auto parts business. Heavily reduced driving on the roads meant less cars needing car parts. But restrictions have been lifting and the Bapcor share price has gone up 80% since 23 March 2020.

Before the pandemic hit, Bapcor had a solid history of dividend growth. I think that good dividends could return as early as FY21. Bapcor currently has a trailing grossed-up dividend yield of 4.4%. I think the FY21 dividend could end up being a similar yield.

Over the longer-term I’m excited by Bapcor’s plan to expand to more than 80 locations in Asia, with a turnover target of $100 million.

Share 2: TPG Telecom Ltd (ASX: TPM)

TPG has grown into a large ASX 200 telco player. It offers a cheaper service for customers and runs with lower costs than rivals like Telstra Corporation Ltd (ASX: TLS).

In the shorter-term the big plan is to merge with Vodafone Australia. Creating one larger company would result in very useful synergies. In-particular, only one 5G network would need to be built.

TPG plans to pay a special dividend of between $0.49 to $0.52 per share. The combination of TPG and Vodafone Australia should also lead to higher ordinary dividends.

The new 5G services should unlock more revenue opportunities for TPG. It’s hard to imagine what the next phase of technology will bring. Augmented reality (AR) and virtual reality (AR) will probably be two areas of data demand growth for the ASX 200 telco share.

Share 3: InvoCare Limited (ASX: IVC)

InvoCare is an interesting (and morbid) ASX 200 share. It’s the largest funeral operator in Australia and New Zealand.

The InvoCare share price is still down 23% from where it was on 27 February 2020. COVID-19 restrictions meant the number of people who could attend a funeral was limited. However, those restrictions are now lifting and funerals are returning to normal operation.

Thankfully, Australia and New Zealand have hardly seen any deaths caused by COVID-19 infections. Indeed, there may be even less deaths this year because of the social distancing and increased personal hygiene. This will lower the funeral operator’s FY20 profit.

However, the ASX 200 share is still predicted to be a beneficiary from the long-term tailwinds of the ageing demographics. Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050. This is a good slow-and-steady tailwind to have. 

InvoCare currently has a trailing grossed-up dividend yield of 5.1%. I believe the FY21 dividend could bounce back to a similar (or higher) level.

Foolish takeaway

I believe that each of these ASX 200 shares has decent growth prospects over the next few years. InvoCare and Bapcor have a history of reliable dividends whilst the combined TPG-Vodafone Australia business will pay higher ordinary dividends.

At the current prices I’d probably go for Bapcor. The fall in new car sales could see more people buying auto parts to make their car live longer instead of buying a different car. Older cars are more likely to need a part replaced.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia has recommended InvoCare 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.

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