It should come as no surprise that in 2013 dividend stocks reigned supreme. In 2014 investors are likely to realise the full values of many blue chip dividend stocks and start looking down the market capitalisation ladder for not only income but growth.
Over the past 12 months, the S&P/ASX Small Ordinaries Index (ASX: XSO) has actually fallen 5%, compared to a 15% gain from the S&P/ASX200 Index (ASX: XJO) (^AXJO), so there's plenty of room for smaller companies to grow in the near future.
You don't have to go to speculative lengths to find some great small-cap stocks. There are plenty of companies which are posting strong earnings growth and may be big businesses in the near future.
One top dividend and growth idea is Mortgage Choice Limited (ASX: MOC). Mortgage choice has a number of significant tailwinds at its back and no debt. It has a trailing dividend yield of 4.7% fully franked and has recently announced its intention to grow its number of employees to keep up with demand.
Newsat Limited (ASX: NWT) is a satellite communications company which is hoping to launch its first satellite into orbit later this year. Newsat's plan may be ambitious but it has the potential to be a very lucrative growth story in the next 10 years. It has already signed significant contracts with government and non-government organisations for up to 15 years.
Cash Converters International Ltd (ASX: CCV) is currently trading at a big discount to its former price around $1.40 per share and dropped as low as $0.75c on the back of possible litigation and changes in lending rules here in Australia. With a market capitalisation under $400 million and growth potential in New Zealand, Australia and the UK, short-term hiccups can be put aside for the sake of its long-term upside. It pays a trailing dividend of 4.4%.
Collection House Limited (ASX: CLH) is a receivable finance manager operating in Australia and New Zealand. It currently trades on modest earnings multiples despite a strong track record and forecast earnings growth in 2014 and beyond. It is moderately priced and pays a trailing dividend of 4.2% fully franked.
Collins Foods Ltd (ASX: CKF) makes this list because I believe it is significantly undervalued given its growth prospects and dividends. It is engaged in the management and operation of KFC and Sizzler restaurants in Australia and Asia. I could see this stock doubling in value in the next three years because of its 30% long-term earnings-per-share growth rate. It also has growing dividends and more stores coming online every year.
