There aren't many businesses on the ASX that deliver strong profit growth and dividend growth year after year.
When you find one of these businesses it's a good idea to buy and hold for the long-term growth and let the dividends roll in.
Past performance is not an indicator of future performance of course, but I think these two businesses have strong futures ahead:
Challenger Ltd (ASX: CGF)
Challenger is Australia's leading annuity business with a market capitalisation of $7.32 billion. Challenger is reporting tremendous growth in its annuity sales, in the six months to 31 December 2016 it reported annuity sales grew by 32% compared to the prior corresponding period.
There is a great opportunity for Challenger over the years ahead because the number of over 65s is expected to grow by 75% over the next 20 years, this is Challenger's target market.
Management are doing a great job of increasing Challenger's distribution channels to increase sales. In FY17 it has added entities like Suncorp Group Ltd (ASX: SUN) and CareSuper to its distribution channels. In FY18 it's scheduled to add AMP Limited (ASX: AMP) and BT Investment Management Ltd (ASX: BTT) to its growing list.
There is a strong possibility that the government may decide that a certain portion of an Australian's retirement assets need to be turned into an income-producing product, which Challenger could provide.
Challenger is currently trading at 19x FY17's estimated earnings with a grossed-up dividend yield of 3.74%.
NIB Holdings Limited (ASX: NHF)
NIB Holdings is one of Australia's largest private health insurers with a market capitalisation of $2.63 billion.
Private health insurance is a contentious issue for some, as it grows more expensive every year and this is putting some people off with how expensive it is.
However, NIB manages to keep growing its total number of policyholders. In the 12 months from 31 December 2015 to 31 December 2016 it grew its total policyholders from 706,226 to 751,629. This is a good performance from NIB compared to rival Medibank Private Ltd (ASX: MPL).
The government needs the private health insurance industry to succeed so that it takes pressure off the public health system which will become increasingly unaffordable if trying to provide the current level of care. Therefore, I think NIB will be able to keep growing profit in the long-term.
NIB is trading at 22x FY17's estimated earnings with a grossed-up dividend yield of 4.17%.
Foolish takeaway
I think both of these businesses will be strong long-term performers for shareholders and are worth a place in any Foolish portfolio.
