3 ASX small-cap shares with 'good growth potential as well as attractive dividend yields'

These could be small caps to buy right now according to one fund manager.

| More on:
Young businesswoman sitting in kitchen and working on laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Wouldn't it be nice to find the perfect combination of solid growth and attractive dividend yields?

Well, at the small side of the market, this might be possible according to analysts at IML. The Australian equities fund manager has just named some ASX small-cap shares that tick all the right boxes.

It notes that it thinks these small caps "are high quality, with strong balance sheets and pricing power that look very well positioned for the next 12-24 months."

It also adds that "all three stocks have very good growth potential as well as attractive dividend yields, and so are likely to deliver growing, and less volatile, total returns for investors."

Which three ASX small-cap shares?

The small caps in question are auto parts company GUD Holdings Limited (ASX: GUD), travel and transport company Kelsian Group Ltd (ASX: KLS), and aged care operator Regis Healthcare Ltd (ASX: REG).

In respect to GUD, the fund manager believes the "quality of the business has improved since it bought APG, with its earnings base now more diverse and resilient."

It also expects GUD to benefit from two ongoing dynamics. These are a large backlog of new car orders and increasing sales of SUVs and 4WDs as a share of new car sales overall. It explains:

GUD stands to benefit from both trends and is likely to grow strongly for the next few years. It's currently priced at around 14 times FY 25 earnings and has a dividend yield of more than 4%. So, while GUD is already up more than 50% this year, we think it still looks cheap.

As for Kelsian, previously known as Sealink, IML believes that the recent acquisition of All Aboard America could be "transformational." It feels the deal gives Kelsian a great platform for further growth in the massive US market. In light of this positive outlook, the fund manager feels the company's shares are very cheap. IML said:

Kelsian is trading on 12 times FY25 earnings, with a fully franked dividend yield of 5%. We think that, when you include the increased US earnings for next year, it looks very cheap for the defensive and low risk earnings growth on offer.

Finally, IML likes Regis Healthcare due to its belief that headwinds in the aged care sector are now reversing. And things are only expected to get better in the future as the "massive wave of Baby Boomers" start to reach the average assisted living age of 84. Pleasingly, it feels the company's strong balance sheet and improving company fundamentals mean it is "very well positioned to be able to build new facilities to meet that demand."

Overall, the fund manager believes its shares are very good value at current levels. It adds:

Regis is currently trading on just over 8 times FY 25 operating EBITDA and with a dividend yield of 5.6% we think it looks very good value.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Small Cap Shares

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Small Cap Shares

3 of the best small cap ASX stocks to buy now

Bell Potter thinks these shares are among the best to buy at the small end of town.

Read more »

A bland looking man in a brown suit opens his jacket to reveal a red and gold superhero dollar symbol on his chest.
Small Cap Shares

Is this the best small cap stock on the ASX right now?

Bell Potter is very bullish on this small cap. Let's find out why.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Small Cap Shares

3 top small cap ASX shares that brokers are tipping for big things

Let's see which small caps are being tipped as buys by brokers.

Read more »

A little girl wearing wonky glasses checks out what's happening in the world on a mobile phone.
ETFs

Why ASX ETFs are a threat to small-cap funds

Experts are concerned about investment capital inflows.

Read more »

Kid putting a coin in a piggy bank.
Small Cap Shares

2 ASX small-cap shares to buy with big potential

Experts reckon these small businesses have big potential.

Read more »

A person with a round-mouthed expression clutches a device screen and looks shocked and surprised.
Small Cap Shares

Why this ASX small cap stock just rocketed 145%

Why are investors getting excited about this stock? Let's find out.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Small Cap Shares

Why this Telstra-linked ASX small cap stock just crashed 90%

This small cap is having a very bad session. What's going on?

Read more »

A young boy wearing a hat, sunnies and striped singlet looks fierce and flexes his arm in victory.
Small Cap Shares

The ASX small-cap stock trading at 'half of the earnings multiple of industry leaders'

A leading fund manager sees a lot of untapped value for this soaring ASX small-cap stock.

Read more »