If you're looking for ASX dividend shares that also offer strong growth prospects, here are two of my top picks. Coming from two very different industries, I believe both have strong and entrenched market positions, proven business models, and strong geographic diversity. This translates to the potential of strong share price growth over the next decade.
Ansell Limited (ASX: ANN)
Ansell has been one of Australia's most successful companies for over a century and has seen strong share price growth over the past 12 months, rising by 34%.
The company is involved in the development, manufacturing, sourcing, distribution and sale of gloves and protective personal equipment in the industrial and medical markets. Ansell operates in two main business segments, Industrial and Healthcare, and has broad geographic and customer diversity with sales operations in 55 countries.
New product lines also position Ansell well to generate growth over the next few years, underpinned by a strong research and development program. An increasing proportion of sales are being generated in emerging markets, which is boosting its growth prospects.
Ansell's significant size and geographic spread helps the company maintain a very strong competitive position. This is further strengthened by the fact that most of its new product lines are patentable and must comply with ever-increasing regulatory standards.
On February 6, 2020, Ansell announced the acquisition of 50% of the issued shares in Careplus (M) Sdn Bhd, a Malaysian manufacturer of surgical, latex and nitrile powder-free examination gloves. Ansell expects the acquisition to close in March and be earnings per share neutral in FY20.
Ansell shares are currently trading on a trailing dividend yield of 2.1%, unfranked.
BHP Group Ltd (ASX: BHP)
BHP is a diversified natural resources company and is one of the world's top producers of commodities like iron ore, coal and copper. The company also has substantial interests in oil and gas, and is definitely my pick of the ASX resource sector shares.
As BHP is the third-largest share listed on the ASX, its shares are frequently bought and held by super funds and managed funds providers. By default, it is also included in many popular Australian exchange traded funds (ETFs) such as the Vanguard Australian Shares Index ETF (ASX: VAS).
BHP's current strategy is to consolidate its current assets. This involves divesting underperforming assets and reducing debt while also increasing operational efficiency.
FY19 was a very successful year for BHP, with strong growth across its various segments. Additionally, BHP increased its dividends in 2019, boosted by strong iron ore prices. The company currently has a very favourable mandate to maintain a dividend payout ratio of at least 50%. BHP shares currently offer a very attractive dividend yield of 5.0%.
This is very different from BHP's strategy of a decade ago when it paid a much lower dividend yield payout ratio. However, the mining giant has increased its dividend almost every year since 2010. BHP shares are also changing hands at an attractive price-to-earnings ratio of 13.9.
