For the record, I don't have kids but if did I'd buy them Class Ltd (ASX: CL1) shares, Pro Medicus Limited (ASX: PME) shares and Nanosonics Ltd (ASX: NAN) shares.
In my opinion, these three small(ish) companies offer the potential of long-term share price growth and dividend income (over time). Importantly, these three companies have characteristics that I believe make their businesses enduring.
Class Ltd
Class is a $346 million technology company. I have written about it so much that I sound — and feel — like a broken record. Nonetheless, Class provides software that is used by financial advisors and accountants to administer self-managed superannuation funds (SMSFs), a very popular investment vehicle for finance-savvy investors.
Given its size and niche market, Class should be considered a higher-risk investment. However, the company compensates for the higher risk with higher growth potential and the chance of dividend income, in my opinion. In the year ahead, analysts expect Class to pay a dividend equivalent to a yield of 1%. I expect that to grow over time.
Pro Medicus
Pro Medicus is a Melbourne-based healthcare software business. Its 'Visage 7' is a software application that enables radiologists and doctors to inspect regulatory-approved medical images like X-rays from almost any device. For example, a radiologist could inspect a 2GB 3D image within seconds on their iPhone. If you're unsure just how big a 2GB image is, it's probably the same download as if you listened to Miley Cyrus's Wrecking Ball 600 times on repeat.
Fair to say it's a great development for the medical imagery marketplace, which traditionally used heavy servers and bulky networks. Pro Medicus has a great product and is run by its founders. It has a dividend yield of 0.6%.
Nanosonics
Nanosonics is another healthcare business taking a simple concept and installing it in a healthcare environment. Nanosonics' 'Trophon' system is increasingly used by doctors to clean and disinfect ultrasound probes.
The $900 million company has grown rapidly because its has a superior product, a simple business model and is well-run. The regulatory-approved Trophon EPR cleans ultrasound probes in just seven minutes. Nanosonics does not (yet) offer a dividend to shareholders.
Foolish Takeaway
If I had kids I would buy them shares in these companies. From a learning perspective, buying shares of companies like Woolworths Limited (ASX: WOW), Telstra Corporation Ltd (ASX: TLS) or National Australia Bank Ltd. (ASX: NAB) is probably a better idea because the businesses are more tangible. However, I think Class, Pro Medicus and Nanosonics offer the potential for superior long-term returns.
Combining share price growth and dividends is the best way to grow your wealth over time, in my opinion.
