3 ASX small-cap shares with 'good growth potential as well as attractive dividend yields'

These could be small caps to buy right now according to one fund manager.

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Wouldn't it be nice to find the perfect combination of solid growth and attractive dividend yields?

Well, at the small side of the market, this might be possible according to analysts at IML. The Australian equities fund manager has just named some ASX small-cap shares that tick all the right boxes.

It notes that it thinks these small caps "are high quality, with strong balance sheets and pricing power that look very well positioned for the next 12-24 months."

It also adds that "all three stocks have very good growth potential as well as attractive dividend yields, and so are likely to deliver growing, and less volatile, total returns for investors."

Which three ASX small-cap shares?

The small caps in question are auto parts company GUD Holdings Limited (ASX: GUD), travel and transport company Kelsian Group Ltd (ASX: KLS), and aged care operator Regis Healthcare Ltd (ASX: REG).

In respect to GUD, the fund manager believes the "quality of the business has improved since it bought APG, with its earnings base now more diverse and resilient."

It also expects GUD to benefit from two ongoing dynamics. These are a large backlog of new car orders and increasing sales of SUVs and 4WDs as a share of new car sales overall. It explains:

GUD stands to benefit from both trends and is likely to grow strongly for the next few years. It's currently priced at around 14 times FY 25 earnings and has a dividend yield of more than 4%. So, while GUD is already up more than 50% this year, we think it still looks cheap.

As for Kelsian, previously known as Sealink, IML believes that the recent acquisition of All Aboard America could be "transformational." It feels the deal gives Kelsian a great platform for further growth in the massive US market. In light of this positive outlook, the fund manager feels the company's shares are very cheap. IML said:

Kelsian is trading on 12 times FY25 earnings, with a fully franked dividend yield of 5%. We think that, when you include the increased US earnings for next year, it looks very cheap for the defensive and low risk earnings growth on offer.

Finally, IML likes Regis Healthcare due to its belief that headwinds in the aged care sector are now reversing. And things are only expected to get better in the future as the "massive wave of Baby Boomers" start to reach the average assisted living age of 84. Pleasingly, it feels the company's strong balance sheet and improving company fundamentals mean it is "very well positioned to be able to build new facilities to meet that demand."

Overall, the fund manager believes its shares are very good value at current levels. It adds:

Regis is currently trading on just over 8 times FY 25 operating EBITDA and with a dividend yield of 5.6% we think it looks very good value.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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