I love looking at ASX dividend stocks that can provide capital and dividend growth, and a good dividend yield.
Companies with long-term growth potential can set investors up for life because of how much they can grow. If we invest in those companies at the 'tree sapling' stage, we can watch them grow into mature trees that produce an abundance of fruit every year.
Ideally, I'd choose companies with a clear path to growth and a plan to achieve it.
Lovisa Holdings Ltd (ASX: LOV)
Lovisa is a growing retailer of affordable jewellery aimed primarily at younger shoppers.
It has a global network and at least 50 stores in numerous countries, including the United States (207 stores), Australia (178), France (86), South Africa (81), and Germany (53).
However, it has less than ten stores in many markets with significant expansion potential, such as Hong Kong (nine stores), Taiwan (one), China (one), Vietnam (one), Spain (two), the Netherlands (nine), Mexico (four).
With low-cost products, it's relatively inexpensive for Lovisa to open more stores around the world. In FY24 alone, the company added 99 new stores to its global network, reaching a total of 900. This helped revenue rise by 17.1%, net profit grow by 20.9%, and the annual dividend per share grow by 26%.
The broker UBS expects the ASX dividend stock to pay a dividend per share of 91 cents per share in FY25, which would be a dividend yield of 2.7%, excluding franking credits. By FY29, the business could be paying an annual dividend per share of $1.46, which would be a dividend yield of 4.3%, excluding franking credits.
Over the long term, I think Lovisa's profit, dividend, and share price can rise as it adds more stores around the world.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is my favourite S&P/ASX 200 Index (ASX: XJO) share when it comes to setting youself up for life.
The ASX dividend stock operates as an investment house, investing in various assets. Its money is spread across a wide variety of areas, including ASX large-cap shares, ASX small-cap shares, private equity, property and credit.
In terms of industries, some of its larger positions include telecommunications, resources, financial services, agriculture, swimming schools, electrification and more.
The ASX share is steadily adding to its portfolio by utilising the cash flow it receives from its investment portfolio while also paying a growing dividend to shareholders.
Pleasingly, it has grown its dividend every year since 2000, which is the longest growth record on the ASX.
Soul Patts has displayed a strong focus on growing its portfolio and dividends, which gives me confidence that the company's leadership will do its best to continue the long-term compounding.
In five years, I think the Soul Patts dividend could be significantly larger. It currently offers a grossed-up dividend yield of 3.8%.
