It's not too often that an ASX share, or exchange-traded fund (ETF), offers investors a healthy combination of capital growth potential and dividend income prowess. Some ASX shares or ETFs are good at one or the other. Some are accomplished at neither. But both? That's where things can get interesting.
Investments that offer both growth and income potential are usually lucrative ones. A company, or set of companies in the case of an ETF, that can afford to pay out substantial income whilst consistently growing its earnings and profits is often a sign of a potentially hot investment.
One such investment is in my own ASX share portfolio, and is one that I have held for a number of years now. Ever since my first purchase, this ASX ETF has delivered both growth and income in spaces. As such, I have no plans to ever sell this high-flying ETF.
It is none other than the VanEck Morningstar Wide Moat ETF (ASX: MOAT).
The VanEck Wide Moat ETF is a fund that is designed to mimic the investing philosophy of the legendary Warren Buffett.
Buffett has long touted the benefits of investing in companies with 'wide economic moats'. A moat is a concept Buffett himself coined a while ago. It refers to an intrinsic competitive advantage a company can possess, which helps it stay ahead of its competition, in the same way a castle's moat kept out intruders centuries ago.
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An ASX ETF to buy for growth and income?
There are a few forms that this kind of moat can take. Some examples include a strong and trusted brand, a cost advantage over competitors, or providing a good or service that customers find difficult to avoid paying for.
The VanEck Wide Moat ETF holds a portfolio of US stocks that are selected based on their perceived possession of at least one of these moats.
We can see this in action by looking at some of this ASX ETF's holdings. As of 31 August, these included the likes of Alphabet, Boeing, Nike, Disney, Adobe, Caterpillar, Microsoft and Clorox.
It's not hard to see why these names appear in MOAT's holdings. Microsoft, for example, provides products like Office, Teams and Windows that are indispensable in modern workplaces. Disney has some of the best intellectual property in entertainment, while Nike has one of the world's most beloved brands.
This strategy has worked exceptionally well for this ASX ETF. Since its inception in mid-2015, MOAT units have appreciated by about 210% (at recent pricing), which works out to be roughly 12% per annum.
In addition, its investors have also routinely enjoyed substantial dividend income from this ETF. MOAT tends to pay out just one dividend distribution every year. But it's often a substantial one. To illustrate, investors have just banked an annual payout worth $7.56 per unit. That gives this ASX ETF a trailing yield of about 6.1%.
If we combine both growth and income, MOAT investors have enjoyed an average return of 15.05% per annum since inception (again, as of 31 August).
Past performance is never a guarantee of future returns, of course. But even so, this track record, I believe, speaks for itself.
