Dividend yields are best serviced with growing earnings. Over the long-term the market has proven time and again that the best way to receive a big dividend yield and franking credits is to buy growth stocks which have a track record of success. Here are four to watch today.
NIB Holdings Limited (ASX: NHF)
NIB is engaged in the provision of insurance products in Australian and New Zealand markets. In FY13 the group reported a solid premium revenue increase of 14.8% and an underwriting profit up 4.3%. It, like many in the health insurance market, can increase the cost of insurance year-in-year-out knowing customers will foot the bill. It has a compounded annual growth rate in earnings of 17.5% and currently yields 4.1% fully franked. It reports its half-year results on 24 February.
Credit Corp Group Limited (ASX: CCP)
Credit Corp is Australia’s largest receivables management company, which specialises in debt purchase and collection. The 2013 annual report included 11% revenue growth, 12% earnings growth to $29.9 million and a 28% dividend increase. In 2013 Credit Corp began its venture in the US debt market after “exploratory purchasing” in 2012. It has bank debt of $4.9 million (very little) and pays a dividend of 3.9% fully franked.
Bentham IMF Ltd (ASX: IMF)
Bentham IMF is a litigation funder. Many investors may have heard of the recent court battle between Australia and New Zealand Banking Group (ASX: ANZ) and thousands of disgruntled customers over exorbitant “late fees”. IMF chooses to fund very important cases for customers who, without its help, would be unable to access the money necessary to be successful in court. IMF’s diligence and subsequent track record is impeccable. It recently updated the market on its half-year performance and notched-up net profit increases of 63% and earnings per share growth of 47%. Despite its track record investors have shrugged off the company’s prospects – perhaps due to the nature of its “bumpy” earnings – and it trades on a forecast earnings multiple of just under 10 and pays a dividend of 4.4%.
IOOF Holdings Limited (ASX: IFL)
IOOF is one of Australia’s largest financial services companies and operates through interests in other businesses such as Ordminnet, Consultum, Lonsdale, My Adviser and Perennial Investment Partners (just to name a few). In 2013, all of its four divisions recorded growth on the back of increased demand from investors wanting exposure to equities markets and proven fund managers. It trades on an earnings multiple of only 20, enabling investors to grab a hold of this top growth stock relatively cheaply with a juicy 4.6% dividend yield.
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*Extreme Opportunities returns as of June 5th 2020
Motley Fool Contributor Owen Raszkiewicz owns shares in Bentham IMF.
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