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I’d buy and hold this 6% FTSE 100 dividend stock and this growth stock right now

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Law firm Keystone Law Group  (LSE: KEYS) delivered its maiden full-year results report today, following its entry to the FTSE AIM market during November, with news it’s “comfortably ahead of market expectations.”

Revenue was almost 24% higher than the previous year and earning per share shot up 71%. The firm has a “strongly cash generative business model” and achieved organic growth during the year because of its “reputation as a leading, quality mid-market law firm.” The company increased its fee-earning personnel count from 228 to 266.

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Challenging the big law firms

The firm sees itself as a challenger law firm and chief executive James Knight said: Keystone is well-positioned to take advantage of the significant market opportunity in the UK legal services market, which we believe is ripe for disruption.”

The firm’s expertise relies on its fee-earning lawyers, of course, and the big fear with this type of set-up is that the business could walk out the door on the legs of the employees one day. Yet that’s exactly how Keystone plans to disrupt the sector, by attracting fee-earning practitioners to the firm – along with their clients! That’s why the figures relating to the fee-earning personnel count will be such an important test of the company’s growth strategy going forward.

City analysts following the firm expect earnings to grow 60% for the year to January 2019 and 26% the year after that, which is a tempting rate of growth. Today’s share price of around 258p throws up a forward price-to-earnings (P/E) ratio just over 21 for the year to January 2020 and the forward dividend yield sits a little higher than 2.3%. Those forward earnings should cover the payment more than three times. I think the growth proposition here looks interesting and that the stock could sit well in a portfolio if balanced by a defensive dividend payer such as FTSE 100 firm National Grid  (LSE: NG).

Attractive quality and valuation

The operator of Britain’s electricity and gas transmission systems looks appealing to me when measured against quality and value indicators, after the fall in the share price over the past year. Today’s 805p makes the forward dividend yield 6% for the trading year to March 2020. And that’s the main attraction. The directors have pushed the dividend yield up a little annually for years, and that situation looks set to continue.

The stock has crept back up since early March, which could indicate that negative sentiment is starting to turn, with investors shrugging off fears about over-valuation and potential nationalisation of the industry. National Grid’s privileged monopoly position means the company will always be subject to fierce regulation — both in Britain and with its US business — and demands on its capital will remain high. But I think there’s a good chance the business will rumble on, paying its dividends to investors for years to come.

The defensive, cash-generating qualities of National Grid make the stock an ideal companion in a portfolio alongside more racy holdings, which target capital growth, such as Keystone Law Group, I reckon. Although there’s handy dividend income available from Keystone, too.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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