There are a select group of ASX shares that could provide a good combination of both growth and dividends over time.
These are businesses that may be able to grow earnings over the long-term, increase the dividend over the years and start with a solid starting yield today.
Here are two that might fit the bill:
Amcor CDI (ASX: AMC)
Amcor is a global packaging businesses. It provides packaging for a wide range of industries including drinks, food, healthcare, home care, personal care, pet care, technical applications and tobacco.
Examples would include things like the packaging you’d find on cheese or meat at the supermarket. Items like toilet paper packaging or wipes packaging are examples of packaging for home products.
Despite all the impacts of COVID-19, Amcor said that FY21 was an outstanding year, exceeding expectations. Net sales increased by 3% to $12.86 billion, adjusted earnings before interest and tax (EBIT) rose 8% to 1.6 billion and adjusted net income rose 13% to $1.16 billion.
The FY21 adjusted earnings per share (EPS) increased even faster thanks to the ongoing share buy-backs. The ASX share’s EPS rose 16% to 74.4 cents. It repurchased $350 million of shares in FY21, equating to 2% of shares outstanding.
In FY22, the business is expecting adjusted EPS to increase by a range of between 7% to 11% on a constant currency basis. It’s also expecting adjusted free cashflow to be between $1.1 billion to $1.2 billion. FY21 free cashflow was $1.1 billion. Management plan to repurchase another $400 million of shares.
In FY22, Commsec numbers suggest Amcor is going to pay a 4% dividend yield and then there could be a slight dividend increase in FY23.
Sonic Healthcare Ltd (ASX: SHL)
Sonic Healthcare is one of the world leading pathology businesses. The ASX share has operations in North America, Europe and ANZ.
It is playing a key role in doing millions of COVID tests around the world. These tests are being done using existing infrastructure. It had done around 30 million COVID tests globally at the time of the FY21 result. Sonic is also Australia’s largest non-government COVID vaccination provider.
FY21 saw a lot of operating leverage. Whilst revenue increased by 28% to $8.8 billion, net profit soared 149% to $1.3 billion.
That profit growth allowed Sonic to grow the final dividend by 8% to 55 cents per share. The total dividend was up 7% over FY21. The ASX share has also announced the acquisition of Canberra Imaging Group and moved to the majority ownership of Epworth Medical Imaging.
It’s looking for further acquisition opportunities. Sonic is also bidding on a number of outsourcing contracts.
Commsec forecasts suggest Sonic Healthcare will grow its annual dividend to $1 per share in FY22, which would be a yield of 2.4%. It’s valued at 20x FY22’s estimated earnings.