I think there are some exciting ASX shares that would be good picks for growth and income.
Over the long-term, I believe that growing businesses will deliver the best long-term results for investors. But I can understand why investors are also looking for a bit of income in this environment.
I think the below ASX shares could offer market-beating growth as well as income that's better than what you can get from a bank:
Class Ltd (ASX: CL1)
Class is a financial technology business. It aims to provide software that automates and simplifies administration. Class helps clients do work quicker and more cheaply, it improves data accuracy and reduces compliance risk.
One of the main reasons to like this ASX share is its high customer retention rate, which was 99% in FY20 for the Class suite of products.
FY20 was a strong year. Operating revenue increased 15% to $44.1 million (beating guidance) and the underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin was 42% (beating guidance).
During FY20 it grew its number of accounts by 4.6% to 187,254. Annual recurring revenue (ARR) increased to $46.8 million in FY20, which also doesn't include $2.4 million of 'pay as you go' revenue.
The ASX share continues to invest for organic growth by regularly improving its existing software. It has also been making changes to improve its addressable market with the acquisition of NowInfinty and the launch of Class Trust.
Class is looking to grow its FY21 revenue by 20%. It's trading at 27x FY23's estimated earnings with a grossed-up dividend yield of 3.25%.
Clover Corporation Limited (ASX: CLV)
Clover and its 'Nu-Mega' products are important in adding ingredients to products like infant formula, without taking away from the taste.
The ASX share's success is linked to the demand for infant formula. There's a reason why the Clover share price has risen by almost 400% over the past five years.
Clover had a pretty strong FY20, which included the disruptive effects of COVID-19 and pantry stocking. Clover's sales revenue grew 15.1% to $88.3 million and net profit after tax (NPAT) soared 23.6% to $12.5 million.
The company is expanding its product range and growing geographically, so I think that it has a long growth runway.
Management said that its concentrated DHA powders have won additional business in a range of new applications covering bread, yogurt, health cars and sport nutrition. New legislation in the EU should also help growth.
However, there was one negative in the FY20 result for the ASX share where it said that COVID-19 has prevented travel of customers to audit the new Melody Dairies nutritional spray dryer in New Zealand, which Clover has 42% ownership and access to 42% of the manufacturing capacity. The travel restrictions will slow production volume initially. The dryer will add capacity and reduce risks for Clover, it's needed to help grow Clover's manufacturing for the coming years of growth.
I believe the company has a positive long-term outlook and it continues to grow its ordinary dividend. In FY20, the ASX share grew its dividend by 5%.
At the current Clover share price it's trading at 17x FY23's estimated earnings. It also offers a grossed-up dividend yield of 1.75%.
Foolish takeaway
Both Clover and Class offer an attractive mix of growth with a decent starting dividend yield. At the current share prices I'd probably go for Clover, I like its international growth and the continuing earnings diversification. But Class could definitely one to watch over the next few years.
But there are other ASX shares that I prefer even more for the growth part of my portfolio.
