With the ASX having made next to no gains over the last year (it's up just 2% during the period), a mix of capital gains and income potential could prove to be a useful asset moving forward.
After all, the ASX's future appears uncertain and, while capital gains could lie ahead, a fat yield could prove highly worthwhile should it continue to disappoint.
With that in mind, here are three stocks that offer a potent mix of income and capital gain potential.
Suncorp Group Ltd
With a fat, fully franked yield of 5.9%, Suncorp Group Ltd (ASX: SUN) certainly ticks the box when it comes to income appeal. In fact, the insurance and banking stock is forecast to increase dividends per share at an annualised rate of over 13% during the next two years, which could push its yield to a level as high as 6.3% in financial year 2016.
In addition, Suncorp continues to offer excellent value for money. Certainly, its price to earnings (P/E) ratio of 17.8 is hardly cheap, but its excellent forecast earnings growth rate means that it has a price to earnings growth (PEG) ratio of just 0.47. This, alongside the potential for a boost to the Aussie economy and further interest rate reductions, could mean that Suncorp delivers a highly appealing total return this year.
Wesfarmers Ltd
Many investors have understandably become relatively concerned with the potential for growth at Wesfarmers Ltd (ASX: WES). After all, the retail sector seems to be becoming even more competitive, with the entry of discount, no-frills operators and the stalling Aussie economy switching the focus back to price. As such, the future looks uncertain for the owner of Coles, Kmart and Target.
Despite this, Wesfarmers is forecast to deliver annual double-digit earnings growth over the next two years and its dividend should rise at a brisk pace and increase its current 4.7%, fully franked yield.
Such a strong earnings growth rate also means that the company appears to offer good value for money, since it has a PEG ratio of just 1.46 which, for such a well established and relatively stable operator, seems to make it a strong buy.
Transurban Group
Very few companies are able to beat the track record of Transurban Group (ASX: TCL) when it comes to top line growth. That's because, over the last 10 years, the toll road and tunnel operator has seen its revenue grow by an astonishing 13.8% per annum. That's a superb rate of growth and has filtered down to the bottom line, with the company's net profit rising at an even faster rate during the period of 19.1% per year.
This stability inevitably means that investors are willing to pay a very high price for shares in Transurban during a lacklustre period for the ASX, with its P/E ratio being 43.3 and price to sales (P/S) ratio being 12.2. Both of these are considerably higher than those of the ASX, with the wider index having a P/E ratio of 15.1 and a P/S ratio of 1.5.
However, with earnings growth set to continue at a similar pace to that achieved in recent years and a dividend yield of 4.2%, Transurban still seems to be worth buying and, although its valuation is very high, it seems to be a stock that continues to offer a potent mix of capital gain and income potential.
