When deciding which stocks to add to a portfolio, it can be a prudent move to have a mixture of companies offering strong growth and upbeat income prospects. After all, cramming a portfolio full of one or the other can mean you miss out on a greater total return, as well as stocks with different characteristics and risk profiles. For example, defensive and cyclical stocks, highly leveraged versus companies with lower borrowings, and volatile versus more stable business models.
One stock that appears to offer a good mix of both income and growth is fund management company, Henderson (LSE: HGG). Its fortunes are clearly closely correlated to the performance of the wider index, since investors tend to be more willing to invest during settled periods and also when the wider macro outlook is positive. And, while the Greek debt crisis is only just drawing to a conclusion, Henderson is already guiding the market towards impressive growth numbers during the next couple of years.
For example, Henderson is expected to increase its earnings by 6% in the current year, followed by a further rise in its net profit of 16% next year. That’s an impressive rate of growth and puts Henderson on a price to earnings growth (PEG) ratio of just 0.9, which indicates that capital gains are very much on the horizon.
Furthermore, Henderson is expected to yield as much as 4.3% next year which, while impressive, is still some way behind Vodafone’s (LSE: VOD) (NASDAQ: VOD.US) yield of 4.9%. Certainly Vodafone’s financial performance has been poor in recent years, with its focus on the slow-growing Eurozone being a major drag on its profitability. However, Vodafone’s move into a more diversified product offering bodes well for its future growth, as well as its relative stability.
In fact, Vodafone’s move into pay-tv and broadband in the UK, as well as across parts of Europe, should provide the company with a renewed growth platform. This could easily spark investor sentiment and change the view among many investors of Vodafone being a slow-growing, utility-like stock. As such, Vodafone’s share price could continue to gain in popularity and move higher as it has done in the last year, where it has risen by 25%.
Meanwhile, the insurance sector continues to offer huge potential for long term investors. A notable stock within the space is Jardine Lloyd Thompson (LSE: JLT). It has delivered a hugely impressive financial performance over the last five years, with its bottom line increasing in each of these years and averaging growth of 10.6% per annum during the period. And, looking ahead, more growth is on the horizon, with JLT’s bottom line set to be around 14% higher in 2016 than it was in 2014.
Furthermore, JLT is expected to yield 3.1% next year despite paying out just 51% of its profit as a dividend. As such, it could become an excellent dividend stock, with a combination of a rising payout ratio and a growing bottom line making its shareholder payout potential very impressive.
