Achieving both substantial capital growth in your portfolio alongside receiving a significant stream of dividend income seems like the Holy Grail of investing. But in reality, most investors don't strive to achieve both goals. In fact, most financial advisors would tell you to aim for one or the other, depending on your age, tolerance of risk and investing goals.
I think believing growth and income are mutually exclusive is a big mistake to make, because there are stocks out there that have a successful track record of delivering both.
Here are 2 ASX shares that I think offer just that.
Macquarie Group Ltd (ASX: MQG)
Macquarie is the biggest ASX financial outside the big four banks – and one that I think offers the best prospects for future growth as well as income. All of our ASX banks are famous for their juicy dividends, but Macquarie's international exposure, successful asset management business and impressive investment banking arm make this bank a growth engine as well. I cant think of any other ASX bank that would give its shareholders 26% capital growth in a year (Macquarie's 2019 YTD return) or 120% over 5 years.
That's not to say you won't get some nice income from this stock. At current prices, MQG shares are offering a starting yield of 4.28% (which comes partially franked). The company has a strong history of dividend growth, but currently only pays out 60% of its earnings in dividends.
All of this adds up to a stock that you want to own, in my opinion.
Telstra Corporation Ltd (ASX: TLS)
A more controversial choice, Telstra has only recently stopped being hated by every dividend investor in Australia. Pains from the implementation of the NBN network resulted in Telstra slashing its dividend by over 50% in 2017 to the despair of its shareholders – but I see some significant upside from here.
The impending rollout of 5G technology has the potential for Telstra to open up a new lucrative stream of earnings. 5G is predicted to usher in a new era of the 'internet of things', and with its heavy investment in its own 5G network, I think Telstra is going to be the biggest ASX beneficiary of this new technology.
I also think Telstra's dividend is looking covered and sustainable at 16 cents per share, which translates to a yield of 4.57% on current prices. If 5G pays off for Telstra, I think this yield could start rising again in the not too distant future – accompanied by decent share price growth.
Foolish takeaway
I think these 2 shares offer investors a compelling story of growth and income. I like Macquarie a little more than Telstra, as there is still some uncertainty about the role 5G will play in the telco space. However, both companies remain big dividend payers with potential future upside.
