S&P/ASX 200 Index (ASX:XJO) shares can generate good returns for investors if they pick the right businesses.
ASX 200 shares are amongst the best in their industry, if not the best outright. That means they have strong market positions, better access to capital than competitors and probably better margins than their peers.
The below three businesses have the long-term potential for good profit growth and perhaps market-beating share price gains. They are also known for being good dividend payers. It's that combination of growth and income which makes me think they could be good ASX 200 share buys for the years ahead:
Share 1: Bapcor Ltd (ASX: BAP)
Bapcor is the leading auto parts business in Australia and New Zealand.
Despite recently announcing solid revenue growth in the last couple of months, the Bapcor share price is actually down 14% since 20 February 2020.
As a reminder, Autobarn same store sales increased by more than 45% in May and June compared to the prior year. On a full year basis to the end of June 2020, Bapcor estimated that Autobarn same store sales will increase by approximately 8%.
The ASX share said Burson Trade also experienced strong demand in May and June with same store sales growth up approximately 10%. On a full year basis, Burson same store sales growth is expected to be around 5%.
I think these are solid numbers for a company that is only trading at 19x FY21's estimated earnings.
Over the longer-term I'm excited by the company's growth trajectory in Asia.
If Bapcor were to pay an annual dividend of $0.15 per share in FY21, it's trading on a forward grossed-up dividend yield of 3.7%.
Share 2: InvoCare Limited (ASX: IVC)
InvoCare is the leading funeral business in Australia and New Zealand.
You'd think a funeral business would benefit from a global pandemic, but that hasn't happened with COVID-19. The social distancing and funeral attendance limits caused a reduction of InvoCare earnings in the first quarter of 2020 despite case volumes remaining flat.
A greater impact is forecast in the second quarter driven by lower revenue per funeral. The case average for the ASX share in April 2020 was down 13.3% on the prior corresponding period. In the first quarter of 2020 InvoCare reported that earnings before interest, tax, depreciation and amortisation (EBITDA) fell 10.7% to $24.7 million.
However, apart from Victoria, Australia appears to have COVID-19 under control. That means that InvoCare's earnings should mostly be able to return to normal. In New Zealand COVID-19 seems to have been eradicated entirely.
This ASX share is leveraged to ultra-long-term ageing tailwinds. Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050.
Sooner or later this COVID-19 period will pass and InvoCare's operating conditions will return to normal. Right now it's trading at under 21x FY21's estimated earnings.
Share 3: Brickworks Limited (ASX: BKW)
Brickworks is a diversified property business. In Australia it produces a variety of different building products including bricks, precast, masonry and roofing.
The ASX share recently announced another impressive win for its industrial property trust that it owns 50% of, along with Goodman Group (ASX: GMG). Amazon is going to lease a 26-metre high facility which will have a floor area of 53,500 square metres. Coles Group Limited (ASX: COL) will also take up a high-tech warehouse at the Oakdale site. Brickworks is building a reputation as a high-tech landlord.
There is still sufficient land in the property trust for several more years of development. Once the Coles and Amazon buildings are completed it should increase the gross assets of the trust to above $3 billion.
COVID-19 had a tough impact on the company and share price a few months ago, but things are looking up now that restrictions are lifting across most of Australia and the US, though the new outbreak in Victoria puts a bit of a dampener on things. The Homebuilder scheme should indirectly benefit Brickworks.
The Brickworks dividend is supported just by the cashflow from its property trust and the dividends from Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). At the current Brickworks share price it offers a grossed-up dividend yield of 5.3%.
Foolish takeaway
Each of these ASX shares look good value to me with a multi-year outlook. At the current prices I'd probably go for Brickworks first – it's trading cheaply compared to its net asset value and the property trust has a compelling future over the next five years.
