These two easily overlooked shares offer serious investors a fantastic opportunity to build wealth, I think, from both share price growth and income from dividends.
A proud record of growth
DCC (LSE: DCC) is an international sales, marketing, and support services group, operating through four divisions: LPG, retail & oil, technology and healthcare.
Its results for the year ended 31 March show it is a business that is achieving considerable growth. In the 12-month period, revenue rose 16%, earnings per share by 12.8% and the dividend per share by 12.5%. The rise in the full-year dividend means that DCC has recorded 25 years of unbroken dividend growth since listing in 1994.
With dividend cover still over 2.5 times then there’s plenty of scope for the dividend to keep heading in the right direction. The strong financial performance of the group also should underpin the share price given the price-to-earnings (P/E) ratio is only 19.
In the markets it targets, DCC tends to be a market leader, so it is the number one health and beauty service provider in the UK, for example. This dominance in its markets creates a moat for the business that makes it harder for competitors to compete and I think that’s a major benefit for shareholders.
Overall it looks to me like the service provider has significant potential to keep delivering for shareholders and I think this potential has been overlooked by many investors.
A successfully adapted business model
Intercontinental Hotels (LSE: IHG) has transitioned away from owning hotels, which is capital-intensive, to managing hotels for landlords and franchising. This asset-light model helps improve profitability and cash conversion which should be good for shareholders.
The group owns well-recognised brands such as Holiday Inn and Crowne Plaza. This helps it to attract customers and maximise the value of its relationships with franchisees. From both landlords and franchisees, IHG collects revenues from hotels without tying up money in actually owning the properties.
Added to the increased profitability of being capital-light is the efficiency savings management are concentrating on. The group is confident there will be around $125m per annum of efficiency improvements by the end of next year.
The big challenge for the group is maximising the revenue per available room, which has fallen in the US and China. It needs to also sensibly navigate potential disruptions in Hong Kong and any global economic downturn, which will hit the hospitality sector hard.
IHG looks like it is doing a lot of things right and I think there’s a lot of growth potential for investors still. The share price has fallen recently which may be a good buying point and the P/E ratio sits at just under 21.
Both these companies, in my opinion, have huge growth potential and represent a far more realistic way to get wealthy than by buying lottery tickets. DCC and Intercontinental Hotels both show signs that point to likely increased share price growth and rising dividends in the future.
