Today my favourite dividend share Retail Food Group Limited (ASX: RFG) presented at the 2016 Rapid Insights Conference hosted by Wilson HTM Investment Group Ltd. (ASX: WIG).
Whilst the presentation wasn?t the most exciting one you?ll see this year, there were a few key takeaways that I believe re-emphasised why this is one of the best shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) for your portfolio.
Retail Food Group is the master franchisor of a collection of popular brands such as Gloria Jean’s, Donut King and Michel?s Patisserie. The company?s strong presence within the $13 billion Australian coffee market…
Whilst the presentation wasn’t the most exciting one you’ll see this year, there were a few key takeaways that I believe re-emphasised why this is one of the best shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) for your portfolio.
Retail Food Group is the master franchisor of a collection of popular brands such as Gloria Jean’s, Donut King and Michel’s Patisserie. The company’s strong presence within the $13 billion Australian coffee market is a key reason for my attraction to the company.
This market is expected to grow to be worth $15 billion by 2020, with an estimated 5 billion cups of coffee being bought per year by this point in time. This level of demand should provide Retail Food Group with solid growth domestically for many years to come.
Even better is the fact that management believes that coffee is recession resistant. It has witnessed solid growth in coffee consumption despite the global financial crisis, economic headwinds, and retail spending uncertainty.
The solid domestic growth is great, but its overseas expansion is perhaps the biggest draw. The company has its eyes firmly set on the Chinese market. I think its joint venture with Chinese restaurant group GouBuLi looks very promising. It aims to grow its international segment to be 25% of total EBITDA by 2018. As of its FY 2016 half-year results, 16.8% of EBITDA came from its international operations.
In the presentation management maintained its full year guidance of net profit after tax growth of 20% year-on-year. This is clearly a company on the rise in my view, and one which I expect will provide investors with good share price gains in the future.
Let’s not forget its fantastic dividend. According to the brokerage arm of Commonwealth Bank of Australia (ASX: CBA), analysts are expecting the shares to provide a fully franked 5.4% dividend in FY 2016. If it does end up paying a 30 cents per share dividend it will be the tenth successive year that the company has increased it.
With the shares changing hands at 13.1x estimated FY 2016 earnings, I believe they are good value. There are very few companies on the ASX which pay an above-average dividend and have as good long-term growth prospects as Retail Food Group. It is because of this that I believe its shares deserve a place in most portfolios today.
Retail Food Group is undoubtedly one of the best dividend shares on the ASX, if you ask me. But it isn't the only one. These fantastic dividends are potentially just as great and worth investigating further today if you have chance. They are great sources of income with potential share price gains on top.
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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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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