I think there are some outstanding ASX shares that can demonstrate both dividends and growth for investors over the long-term.
There are not that many businesses that have the potential to do that. Some ASX shares are very big and have largely reached the end of their faster growth potential, though they may be solid for dividends. Then there are plenty of ASX growth shares, but not many of them are paying large dividends. The higher earnings valuation multiples reduce the prospective dividend yield.
GQG Partners Inc (ASX: GQG)
GQG is one of the biggest fund managers on the ASX. It predominately makes its profit from management fees (not performance fees). As funds under management (FUM) grows, it means the business can be more profitable.
The ASX share just gave its monthly FUM update, showing that total FUM increased by $3.1 billion to $92.9 billion, recovering from the recent volatility.
For the quarter ending 31 March 2022, it experienced net inflows of US$3.4 billion, despite “an extremely challenging macro environment.”
Management continues to see business momentum across multiple geographies and channels. It saw positive net flows from all three of its major channels and positive net flows from multiple geographies, notably in the Australian and Canadian retail channels.
In FY23, CommSec estimates suggest a dividend yield of 9.5% in FY23 and 10.5% in FY24.
Nick Scali Limited (ASX: NCK)
I think that the last four years have shown the quality of the business, it’s a stronger company than I previously gave it credit for.
It operates the Nick Scali network of stores. The ASX share also recently acquired Think-Plush Sofas.
There is an excellent opportunity to grow the store networks of both businesses, which makes for an easy way to add scale.
I’m particularly optimistic about the company’s potential to increase its profitability through online sales.
In the FY22 half-year report, it had $19 million of overall written sales orders – including $2.4 million for Plush. Revenue for Nick Scali online reached $13.7 million, generating an EBIT contribution of $8 million. The more sales online it can do, the more profitable it can become.
The online store could also allow the ASX share to expand its range, increasing its addressable market.
I believe the company’s profit and dividends in FY23 and beyond could be attractive compared to FY19 (pre-COVID).
The Nick Scali share price has fallen around 30% since 19 November 2021. CommSec numbers suggest a dividend yield (including the franking credits) of 9.6% in FY23.
