Some of my favourite shares are those that offer a combination of fast growing earnings AND fast growing dividends.
These types of shares usually offer lower dividend yields than many of their peers, but investors can expect to be rewarded over time through a combination of bigger dividends and handsome capital gains.
Fortunately, the ASX has a number of shares that perfectly fit this criteria, including:
| Company | Market Cap | PEG* Ratio | 2-Yr EPS** Growth Forecast (Avg. p.a) | Dividend Yield | 2-Yr DPS*** Growth Forecast (Avg. p.a) | DPS 5-yr Growth Rate (p.a) |
|
|
$2.1 billion | 1.09 | 33.8% | 1.4% | 31.7% | 37.8% |
| $5.9 billion | 1.32 | 11.8% | 2.2% | 9.5% | 26.4% | |
| $5.2 billion | 1.56 | 28.5% | 1.5% | 30.1% | 28.5% | |
| $11.5 billion | 1.34 | 21.0% | 1.6% | 23.7% | 30.9% | |
| $3.1 billion | 2.06 | 8.8% | 4.3% | 12.9% | 21.3% | |
| $7.8 billion | 2.38 | 14.9% | 1.5% | 16.7% | 25.7% | |
| $591 million | 0.62 | 23.4% | 5.4% | 19.8% | 12.9% | |
| $14.1 billion | 1.85 | 14.9% | 1.8% | 11.1% | 18.0% | |
| $56.9 billion | 1.24 | 27.9% | 1.4% | 18.7% | 16.2% | |
| Greencross Limited (ASX: GXL) | $836 million | 1.85 | 9.8% | 2.7% | 9.0% | 25.4% |
Source: CommSec
*PEG = Price-to-earnings Growth Ratio, **EPS = Earnings per share, ***DPS = Dividends per share
Unsurprisingly, every single share listed in the table above has significantly outperformed the broader market over the last five year period.
More importantly, the outlook for these shares is very positive, with strong EPS and DPS growth forecast for the next two years.
So the question really comes down to a matter of valuation – what should an investor be willing to pay for a piece of the pie?
Unfortunately, this is a really hard question to answer and most investors will need to consider their own risk profiles to determine how comfortable they might be with buying the shares at current prices.
Personally, I think there are three stand-out value opportunities from the shares listed in the table above:
- RCG Corporation – Shares of the footwear retailer have been hammered on the back of a small profit downgrade and concerns around the entry of Amazon into the Australian market. However, I believe the market has over-reacted and now is a good opportunity to pick up one of the ASX's best retail shares at a steep discount.
- Greencross – The veterinary company is rolling-out a clever strategy of co-locating its clinics inside or next to its network of retail stores. This is proving to be very successful and is helping to drive a strong level of like-for-like sales growth. The outlook for the industry is very attractive and Greencross is well-positioned to deliver many more years of growth.
- TPG Telecom – The telco has been under pressure over the last six months, but it appears the worst might finally be over. TPG delivered a solid first-half result and is well placed to easily meet its full year earnings guidance. The company has one of the best management teams on the ASX and I think this is a huge advantage in a rapidly changing operating environment.
