In part 1 of this article, I highlighted two high quality companies that might meet the initial investing checklist of Warren Buffett, the billionaire investor. His high standards of performance and profitability are what helped him build an investing empire since 1957. Talk about long-term investing!
Continuing with high quality stocks, let's look at companies with good dividend yields and growth that could give investors an above average return over the long run.
The ASX has returned a long-term average of about 11% – 12% annually for share price gains and dividends. That's your mark to beat the market's returns. There are many companies that could do that in one year or several years.
However, Buffett's key word here would be consistent returns. If a company's performance is consistently good, then it's a more reliable earner- similar to a "bond-like" equity paying a stable income each year.
With that in mind, here are two quality companies with strong brands that could give investors both decent growth and a high yield.
— Flight Centre Travel Group Ltd (ASX: FLT), the biggest domestic travel agency network in Australia is working to duplicate its success here overseas. It already has offices in 17 US cities for its FCm Travel Solutions corporate travel business and has plans for its retail Hyperstore format offices in a number of cities like LA, Boston and Philadelphia. Similarly, it is building up a corporate travel network in the UK as well.
It has made several recent acquisitions that will expand it into the tour operator business in the UK and Vietnam. The stock pays a 4.1% yield fully franked and dividends have risen consistently over the past five years.
— Insurer and fifth-largest bank operator Suncorp Group Ltd (ASX: SUN) is reorganising its businesses to simplify operations and bring out big cost savings. Over the past several years it has built up a lot of surplus capital to strengthen its balance sheet and it has put its bank's mortgage loan books on a strong footing while the housing market is rising.
Shareholders have benefited from three special dividends in the past three years. That's on top of full year dividend increases over the same time. The stock pays a huge 5.9% yield fully franked, which would be greatly appreciated since bank term deposit rates are heading down. The company said it intends to return surplus capital to shareholders, so investors may look forward to further special dividends possibly. It's a conservative and well-run business that could be a good part of your long-term portfolio.
