2 Growth Stocks With Strong Dividend Momentum

Prague, Czech republic - October 1, 2015: Volkswagen car maker logo on a building of dealership on October 1, 2015 in Prague, Czech republic.

Growth stocks are defined as companies that can grow their net profits at a healthy clip.

Personally, if a company can grow its earnings by upwards of 10% year-on-year, I would classify it as a growth stock.

Investors invest in growth stocks to enjoy the capital appreciation that comes with them.

However, let’s look at two stocks that would allow investors to not only enjoy capital gains but also a growing dividend payout.

Company 1      

AK Medical Holdings Ltd (SEHK: 1789) is a Hong Kong-listed medical devices company with a market capitalisation of HK$22.95 billion (US$2.96 billion).

The medical device maker is a leader in the Chinese orthopaedic joint implant market. The company designs, manufactures and sells hip, knee, spine and other implants.

Over the past five years from 2015 to 2019, AK Medical has delivered an annualised net profit growth of 40.72%.

This was on the back of higher revenue generated by the company as it sold more implants and expanded its product portfolio.

Its growing net profit has also led to the company paying out a higher dividend of HK$0.075 in 2019 compared to HK$0.035 in 2018.

With net profits projected to continue growing into the future, investors should expect the dividend payout to follow a similar trend.

Company 2

Nissin Foods Co Ltd (SEHK: 1475), which is an instant noodle giant, is the second company. Nissin has 61 years of brand history, with two popular brands under its umbrella; Damae Iccho and Cup Noodles.

Over the past five years, Nissin has seen its net profit increase from HK$101 million in 2015 to HK$251 million in 2019, indicating an annualised growth of 25.56%.

The recent lockdown should have been beneficial to Nissin as more individuals would have consumed instant noodles while stuck at home.

Like AK Medical, Nissin’s management is keeping shareholder interests at the front of their minds.

As such, they have declared increasing dividends as profits have climbed. From 2017 to 2019, Nissin has seen its dividends grow at an annualised rate of 26.6%, increasing from HK$0.073 to HK$0.117.

As Nissin continues to grow its net profit, a similar trend of increasing dividends should follow.

Foolish summary

Companies take time to grow, and this means that investors need to have the patience to stick with a good company once identified.

Some companies, like the ones mentioned above, provide an additional benefit in that investors get paid while waiting patiently.