Mantra Group Ltd (ASX: MTR) and Retail Food Group Limited (ASX: RFG) are offering big dividends and modest growth potential.
Shares for Growth & Income
When you are investing in the sharemarket most people think of the capital gains to the made (and maybe the losses that could be incurred). However, dividend income provides a real boost and yet is sometimes greatly unappreciated.
For example, over the past five years the Australian sharemarket, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), has returned 30%. That does not include dividends. Meanwhile, the same index but with dividends included, the S&P/ASX 200 Net Total Rtn (Index: ^AXNT) (ASX: XNT), has returned 61%.
In other words, over the five years, when dividends are included — the sharemarket has double the return!
That is why I think it is best to target growth and income when you are investing in shares. As an added bonus, many Australian companies pay tax-effective dividends.
Mantra
Mantra is one of Australia's leading resorts and hotel operators. It also owns brand names such as Breakfree and Peppers. Mantra shares have been sold down as the threat of online disrupter Airbnb challenges incumbent hotel operators.
However, most recently Mantra reported revenue of almost $690 million, up 14%, along with a similar rise in profit. It also paid a fully franked dividend which takes its yield to over 3.5%.
Retail Food Group
RFG is the most popular small company on the ASX, according to a recent report which ranked smaller companies by investor purchases. However, that has not stopped the company's share price sliding down 34% over the past year.
Despite fears of slower franchise growth, however, RFG appears to be continuing to build momentum in its key coffee business. At today's prices it is forecast to pay dividends of more than 6% with franking.
Foolish Takeaway
While term deposits are returning a low amount of interest, the ASX is offering potentially tax-effective dividends and capital growth. I'm watching Mantra and Retail Food Group shares in 2017 but I'm not in a rush to buy them at today's prices.
