Don’t miss these 5 overlooked dividend shares

Credit: Newyorklegoboy

When it comes to dividends the first names that pop into income investors’ heads are shares such as Woolworths Limited (ASX: WOW). But the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is blessed with a plethora of dividend shares for investors to choose from. A few that I think could be flying under the radar are:

Automotive Group Holdings currently pays a fully-franked 5.2% dividend. Considering that, according to CommSec, the company has grown its dividend on average by 9% each year for the last 10 years, I think it’s safe to presume that it will perform well in the future. What I also like about the diversified automotive retailing and logistics group is that it has consistently produced a return on equity of approximately 14% in the last few years, while growing its shareholder equity substantially from $454 million in 2012 to $672 million today.

Fantastic Holdings is a furniture retailer that has been overshadowed by competitor Nick Scali Limited (ASX: NCK) in recent years. Still, the company expects to announce revenue growth of 15.7% year over year to $270m next week for the half year. If analysts are to be believed, the forecast 2016 dividend of 14 cents will yield a fully-franked 7.6%. Recent resignations of the CEO and CFO have raised a few eyebrows, so it does cast an element of doubt over the dividend. But with little debt and a strong cash balance the company is more than capable of paying it out.

McMillan Shakespeare is a provider of salary packaging, novated leasing, and fleet and asset management through a portfolio of brands which includes Maxxia, RemServ, Interleasing, and Holden Leasing. Despite being up by around 5% during trading on Wednesday its shares still trade on a forward price-to-earnings ratio of 10.5, with a forecast dividend yield of 6.8% in 2016 according to analysts. The same analysts believe that earnings will grow at 13% per annum for the next two years, which makes these shares a very tempting investment.

National Storage, as the name implies, owns and operates self-storage units. Its shares currently yield a fully-franked 5.6% dividend which looks set to grow by around five to six percent next year. Management advised in its half year report that it will payout between 90 and 100 per cent of earnings, which it expects to come in at 8.7 to 8.8 cents per share. Storage demand in Australia has grown by 2.3% per year for the last five years according to IbisWorld, and looks set to remain steady in the years ahead.

Retail Food Group currently pay a 5.5% dividend which again is fully-franked. The thing that I like most about Retail Food Group is that through its portfolio of franchises the company is able to produce consistent earnings. As disposable income levels grow in Australia, thanks in part to low fuel costs, consumers have money burning a hole in their pocket. Franchises such as Gloria Jean’s, Donut King, and Michel’s Patisserie, should all hopefully benefit from this. As such I expect earnings to grow strongly, and its dividend, which has grown each year for the last nine years, to continue growing as well.

Foolish takeaway

I feel these five shares offer investors great alternatives to the usual blue-chip dividend shares. Which could be a very good thing for income investors considering rumours of the banks and miners being under pressure to cut their dividends.

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Motley Fool contributor James Mickleboro has no financial interest in any company mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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