There are a certain group of ASX shares out there that are producing a mix of both dividends and growth.
Some businesses are known for paying a high dividend yield to investors, while others are growing quickly and re-investing a lot of that profit back into more growth.
But there could be some ASX shares that provide a useful mix of both dividends and capital growth.
Brickworks Limited (ASX: BKW)
Brickworks is well known for manufacturing and supplying a number of building products in Australia and the US. In Australia, it’s the market leader in bricks and has strong market positions in a number of other areas including roofing, masonry, and precast.
In the US, the business has been expanding with acquisitions and it’s making them more efficient and profitable. It’s the market leader of bricks in the northeast of the country. Brickworks recently acquired a brick distributor to increase its scale.
The business has two asset groups that are delivering fairly consistent asset value growth as well as cash flow growth which is funding the rising dividend.
Brickworks owns a substantial amount of shares of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which is a diversified investment conglomerate and Brickworks is benefiting from the long-term returns and growing dividend. Soul Patts is planning on becoming more diversified with its investments after the recent acquisition of Milton, giving it more financial firepower to go for different assets.
The other area of growth for the ASX share, that Brickworks has much more control over, is the industrial property trust joint venture with Goodman Group (ASX: GMG).
At the latest disclosure, the property trust had $2.7 billion of gross assets, with $2 billion being leased assets and another $0.7 billion of development land. After including debt, Brickworks’ 50% share of net assets was valued at $911 million, up from $727 million in FY20.
These industrial properties are experiencing structural tailwinds, driven by industry trends towards online shopping. The trust also has a long pipeline of further development, with pre-committed developments to be completed over the next two years which is expected to drive an increase in leased asset value and rent of around 60%.
At the current Brickworks share price, it has a trailing grossed-up dividend yield of 3.7%. It hasn’t cut the dividend for over 40 years.
Premier Investments Limited (ASX: PMV)
Premier Investments is an ASX share with a diversified portfolio of retail brands and investments. Its brands include Smiggle, Peter Alexander, Just Jeans, Jay Jays, Portmans, Jacqui E, and Dotti. Meanwhile, it has sizeable investments in Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).
The FY21 result demonstrated the overall resilience of the company’s brands to achieve growth.
Total retail sales increased 18.7% to $1.44 billion. Peter Alexander sales grew 34.7% to $388.2 million and the apparel brands saw sales growth of 25.3% to $841.6 million.
Online sales continue to grow faster than the overall business, at high profit margins. Online sales grew 36.4% to $300.7 million.
Total sales grew 18.7%, the ASX share’s gross profit grew 25.1% year on year, underlying earnings before interest and tax (EBIT) increased 88% to $351.9 million and statutory profit rose 97.3%. This demonstrated operating leverage for the business.
Smiggle is seeing a rebound as schools reopen, with “strong” like-for-like growth where restrictions are eased.
In FY22, while lockdowns in Australia have hurt sales in the short term, global online sales were up 44.6% in the first seven weeks. Its online business continues to see an EBIT profit margin that’s “significantly higher” than the store network.
In FY21, the board decided to grow the full-year dividend by 14.3% to $0.80 per share. At the current Premier Investments share price, it has a grossed-up dividend yield of 3.5%.