One of the main things I like to see from ASX dividend shares is a combination of earnings growth and good dividends.
I also like capital growth, and earnings growth is an important factor in achieving that. Earnings growth can also fund larger dividends.
No business is guaranteed to see earnings growth, but I like the tactics of the ASX dividend shares below to increase their profitability. If I were investing for a good dividend yield and earnings growth, they are the two I'd pick.
Image source: Getty Images
GQG Partners Inc (ASX: GQG)
GQG is a fairly large fund manager based in the United States, but it has an international presence with clients in Canada, the United Kingdom and Australia.
It offers investors different funds, with its main strategies being US shares, international shares, global shares and emerging markets.
Those funds have managed to deliver impressive outperformance of their benchmarks over the long term. This is a useful tailwind for organic funds under management (FUM) growth as well as attracting new money to manage from investors. Long-term investment returns can help grow the ASX dividend share's earnings and dividends.
GQG's FUM was US$159.4 billion as of October 2024, up from US$120.6 billion in December 2023 — an increase of 32% in 10 months. To date, the company has experienced net inflows of US$20.3 billion, which unlocks stronger management fees and bigger operating earnings.
The business looks to pay a dividend payout ratio of 90% of distributable earnings, which results in a pleasing and sustainable dividend yield. Based on the Commsec projection, GQG is forecast to pay a dividend yield of 8% in FY25.
Telstra Group Ltd (ASX: TLS)
As Australia's largest telco, the company's scale comes with a number of advantages. For example, it can invest the required amount into building its 5G network while also paying investors a pleasing dividend.
In my opinion, Telstra is generating impressive growth in its mobile division. In FY24, mobile handheld users grew 4.1%, mobile income lifted 5% to $10.7 billion, and operating profit (EBITDA) jumped 9%. This helped the ASX dividend share's net profit increase 7.5% to $2.3 billion. It also enabled a 5.9% increase in the dividend per share to 18 cents.
Telstra is investing in telco infrastructure that can help unlock further subscriber growth and could eventually lead to material earnings from 5G-powered wireless home internet, which would allow the company to capture the broadband margin back from the NBN, in my view.
According to the forecast on Commsec, Telstra is projected to pay a dividend per share of 19 cents in FY26. This would be a grossed-up dividend yield of 7% (including franking credits).
