ASX shares can be a great way to build wealth, even if people don't have a large nest egg to start with. A 50-year-old still has plenty of time to build a good amount of wealth. If we're targeting a retirement age of 70, that gives us 20 years to build up a portfolio.
There are three different ASX shares I'm going to talk about, which could provide a mixture of capital growth and dividends. Here they are.
Wesfarmers Ltd (ASX: WES)
Wesfarmers may be one of the strongest companies in Australia – it operates a number of businesses that are among the leaders in their industries, including Bunnings, Kmart and Officeworks.
The ASX retail conglomerate can trace its origins back to 1914, and its portfolio of businesses has changed over the decades. For example, it has invested in coal in the past, and now it's expanding into lithium. I think this flexibility will ensure it remains future-focused for the long term.
I think Wesfarmers can continue to grow its earnings per share (EPS) over time as its core businesses do well and it invests in new offerings, like lithium and healthcare. The ASX share recently announced the acquisition of digital health provider InstantScripts.
Wesfarmers wants to keep growing its dividend for shareholders, which could make the ASX share a good option for retirement now, in 10 years or in 20 years.
According to Commsec, at the current Wesfarmers share price, it could pay a grossed-up dividend yield of almost 6%.
Vaneck Morningstar Wide Moat ETF (ASX: MOAT)
With the way this ASX-listed exchange-traded fund (ETF) is set up, I think most of the returns that it delivers will be in the form of capital growth.
It invests in United States-based businesses, which typically have lower dividend yields compared to ASX companies.
The concept is that the MOAT ETF invests in companies that are seen by Morningstar analysts as having an economic moat, or competitive advantages, that are likely to endure for the next decade and possibly even longer.
The ASX ETF only invests in those competitively-advantaged companies if they are trading at a price that's attractive compared to what analysts think the 'fair' value is.
Over the past five years, the MOAT ETF has delivered an average return per annum of 15.6%, which is a strong level of return. Over that period, only an average of 2.75% per annum of the ETF's return came from income.
In the next two decades, I think this investment could be capable of producing plenty of pleasing capital returns.
Johns Lyng Group Ltd (ASX: JLG)
This ASX share is rapidly growing its passive income payments for shareholders, increasing profit and growing its scale. I think it could provide an attractive combination of capital growth and dividends over the long term.
The company is a building services group that delivers building and restoration services across Australia, New Zealand and the US. Its niche is providing those services to rebuild and restore properties and contents after impact, weather and fire events.
Its customer base includes major insurance companies, commercial enterprises, local and state governments, body corporates and owners' corporations and retail customers.
FY23 saw revenue rise 43%, while net profit after tax (NPAT) went up by 64%. This helped Johns Lyng increase the dividend by around 58%.
Not only could an increase in the amount of storms and flooding boost its core earnings, but it's also expanding into other adjacent areas. For example, it's growing in the strata management market through acquisitions, where it can also execute cross-selling opportunities to its existing businesses with building and restoration works.
Essential home services are another growth area, such as the recently-acquired Smoke Alarms Australia, where there are more cross-selling and "defensive growth" opportunities. In FY24, the company expects to grow its business-as-usual earnings before interest, tax, depreciation and amortisation (EBITDA) by 20.1% in FY24.
