3 companies to compound your wealth

These companies offers some great opportunity to compound your wealth.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As investors it's easy to get carried away at times. Imagining the rewards having picked the next explosive growth industry. The problem is others will have picked it too, and prices are likely so high in anticipation of over-hyped future returns that they have no place to go but down. In fact, it's often the least exciting businesses that let investors get ahead in the market.

These companies may not be glamorous, newsworthy, or the next big thing, but they're reliable profit machines and you can console yourself from the lack of excitement with the strong returns generated. Moreover, the consistently rising profits support growing dividend payouts – allowing smart investors to compound their wealth by reinvesting the hefty dividends. So move over The Wolf of Wall Street, here comes The Wolf of Bore Street.

The Australian Gas Light company, or AGL Energy Ltd (ASX: AGK) lit the first gas lamp in Australia nearly 175 years ago. That's a long track record of success and as one of Australia's leading retailers of gas and electricity it has defensive earnings streams capable of generating regular and growing dividends. With a focus on renewable energy; including hydro, wind, solar and geothermal, it's also nicely aligned to the long-term trend of government support for the renewable sector.

Shares currently trade for $15.20, substantially below Morningstar's recently upgraded fair value estimate of $16 per share. At current prices its offering a fully franked trailing dividend yield of 4.3% and looks a good investment.

APA Group (ASX: APA) is Australia's largest natural gas transportation and infrastructure business and the last financial year saw it increase both revenue and adjusted profit by more than 20%. Total revenue was $1.27 billion and growth plans include the full takeover of Envestra Limited (ASX: ENV) in a deal valuing the takeover target at $2.2 billion.

It also has ownership interests in the Ethane Pipeline Income Fund (ASX: EPX), which pays quarterly dividend payments. Based on the top end of the Fund's FY 2014 distribution guidance, it's trading on a partially franked dividend yield of 7.8%.

APA Group has grown profits year-on-year for the last 10 years. It recently stated that it expects FY 2014 distributions per security to total at least 36 cents per share, which places it on a forward dividend yield of 6% and makes it a highly-attractive proposition.

Origin Energy Limited (ASX: ORG) is another business with defensive earnings and solid growth prospects. It offers investors exposure to commercial oil and gas exploration and production alongside retail energy supply. According to Morningstar, earnings per share are forecast to grow from 69.6 cents per share (cps) in FY 2013 to 86.3 cps in FY 2015. The company pays an attractive trailing dividend yield of 3.6% and appears well positioned for steady capital growth.

Foolish takeaway

When it comes to investing, often boring is best. So Bore Street it is, and utility companies with reliable earnings, low debt and relatively little competition should form a balanced part of every intelligent investor's portfolio.

Motley Fool contributor Tom Richardson has no interest in any company mentioned in this article. You can find him on Twitter @tommyr345

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »