When most investors think of growth stocks, they think of high-risk, high-reward equities, which are generally small-caps.
However, there are other stocks out there that can provide similar returns with much less risk making them the perfect long-term investments.
HICL Infrastructure (LSE: HICL) is a perfect example. This company specialises in infrastructure investment, a low-risk, high-return asset class where investments are made on a multi-decade time frame and investors can profit from net asset value growth and dividends.
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Over the past five years, NAV growth and income has given a total return of 10.2% per annum, although gains would be in the mid-teens if you include dividend reinvestment.
This double-digit growth rate looks set to continue. According to the company’s figures for the six months to 30 September, annualised NAV grew by 8.9% for the period including dividend growth. After this expansion, the NAV per share is 151.6p, compared to the 31 March value of 149p. For the year management is targeting aggregate dividends of 7.85p per share, rising to 8.25p for fiscal 2018 giving a dividend yield of 5% for this year and 5.3% for 2018.
Stability in infrastructure
As a long-term growth investment, I believe that HICL ticks all the boxes. While growth may not be as fast as the likes of Boohoo.Com, it is highly predictable. For example, this year the company has made investments in regulated utility Affinity Water and High Speed 1 rail assets for a total of £452m, and the overall portfolio has a weighted average life of more than three decades.
These investments should produce steady returns for many years to come giving both investors and management a bright outlook for growth as well as returns.
Even though the shares trade at a 5% premium to NAV, I believe that this is a premium worth paying for the defensive growth on offer.
Renewable energy income
John Laing Environmental (LSE: JLEN) has many similar traits to HICL. The company invests in the environmental infrastructure market, which is expanding rapidly.
John Laing Environmental invests in many different assets, but renewable energy assets are a large part of the portfolio. Unfortunately, this has held the company back this year, with management noting in today’s half-year results for the period to 30 September 2017 that NAV per ordinary share declined to 99p from 100.1p as previously reported primarily due to the decrease in forecast electricity prices during the period.
Still, management continues to look for opportunities to invest further and is on target to produce a net annualised return of 7.5% to 8.5% on its IPO price over the long term as well as aiming to pay a dividend that increases in line with inflation.
A dividend payout of 6.3% is targeted for 2017 giving a dividend yield of 6.1% at the current price. With steady high-single-digit returns expected for the foreseeable future, John Laing Environmental is one stable growth stock I’d be happy to buy and forget for the next decade.
