There certainly are a great deal of quality companies for investors to choose from on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in 2017.
Three shares which have caught my eye recently are accommodation provider Mantra Group Ltd (ASX: MTR), master franchisor Retail Food Group Limited (ASX: RFG), and telco company Vocus Communications Limited (ASX: VOC).
Here are three reasons why I would invest in them next year:
Reason 1: Their shares are cheap
I believe all three companies are cheap relative to their growth potential. Of the three Vocus would have to be the cheapest by far in my opinion. Its shares are changing hands at just under 13x trailing earnings which is generally the price investors would pay for slow growth. Yet Vocus expects underlying net profit after tax in FY 2017 to be in the range of $205 million to $215 million, which would mean double-digit growth in earnings per share.
Reason 2: They pay market-beating dividends
All three companies pay a fully franked dividend of at least 4%, compared to the market average of 3.6%. Retail Food Group is the star of the show here in my opinion and is expected to provide investors with a fully franked 4.4% dividend in FY 2017 according to CommSec. The company behind Gloria Jean's and Dunkin Donuts has grown its dividend each year for over a decade and I expect this trend will continue for the foreseeable future.
Reason 3: They have favourable tailwinds
Each of the companies has the wind in their sails for very different reasons. Mantra is the standout for me in this regard thanks to the tourism boom. With 20,000 rooms under management in key tourist hotspots, I believe Mantra is poised for strong long-term earnings growth. For the others a weak Australian dollar should be a boost to the international expansion of Retail Food Group, and Vocus looks set to benefit from market share gains as the NBN rolls out.
Overall I believe the stage is set for each of these shares to have a strong 2017 and I would be more than happy to have them all in my portfolio.
