The current Commonwealth Bank of Australia (ASX: CBA) share price leaves a lot to be desired — the Vocus Group Ltd (ASX: VOC) share price is much more tempting, in my opinion.
Commonwealth Bank
Commonwealth Bank, or CBA, has a rich history of dividends. Not long after its shares first floated on the Australian stock exchange back in 1991 the company paid dividends of 40 cents per share. At the time, CBA shares traded for little more than $6 each.
Fast-forward a few decades and CBA is worth $140 billion, it pays $4.20 in annual dividends and its share price traded as high as $86 last week.
However, whenever you invest in the sharemarket, you are investing in the future of a company — not the past. After all, if it were as easy as looking at the history of a company, librarians would be the best investors.
Looking ahead, I doubt CBA can grow its profits as fast as it has in recent decades. I expect it to grow healthily in coming years but because I think growth is likely to be slower, I expect to pay a lower price.
Currently, the CBA share price is a little high for me to get excited. Sure, CBA has a dividend yield of 5% fully franked but if you are investing for five years or more you should demand dividends and growth.
Vocus Group
Vocus Group is the owner of Dodo, Primus, M2, Nextgen, Amcom and much more. The Vocus share price has gone in the opposite direction of CBA over the past six months — falling 46% versus CBA's 12% rise.
The Vocus share price fall comes despite the company recently reporting a 400% increase in half-year revenue and a 94% increase in profit.
Vocus is still digesting the acquisition of Amcom, M2 Group and NextGen, which are expected to generate up to $95 million in synergies by 2020. These big acquisitions could be the reason the market is a little spooked.
Foolish Takeaway
Although Vocus is a riskier proposition than Commonwealth Bank, I think it is a worthy contender for a long-term investment at today's prices. In my opinion, Commonwealth Bank shares appear a little too expensive given its outlook for growth. Vocus, on the other hand, offers decent growth and a 3% dividend yield.
