Having good, reliable dividend income every year comes down to investing in good companies that can support the payment and even increase it as they grow earnings. Unfortunately, it may not be the number one priority for investors though.
Everyone wants stocks that climb up in share price and the dividend can be a second thought to some. It isn’t as glamourous as being able to say one of your stocks went up 50% or even doubled in price. It’s more like bragging about your bank account interest rate.
Nevertheless, the money adds up over time and the power of compounding interest can work for you as well.
Here are four companies that pay a decent dividend yield and are currently at attractive share prices.
Super Retail Group Ltd (ASX: SUL), the specialty retailer of auto accessories, sports and leisure equipment and apparel, has a yield of 3.6%. A recent decrease in share price from about $14 to $10.70 has increased the dividend yield, so you can use that to your advantage.
The company has a strong track record of raising earnings, but in the first half of FY2014 a few short-term issues disappointed the market, so it was sold off. Even so, it still raised its interim earnings per share and dividend.
Monadelphous Group Limited (ASX: MND) has an 11 PE and a very attractive 7.4% dividend yield. The yield is that high because the mining pullback is not creating as many work contracts as before. The share price has suffered for it.
While the company is offsetting that with work in the oil and gas industry, it expects that 2014 full-year revenue may be 10% down. The share price is down from its January 2013 high, yet the beat-down it has received may be overdone. When the level of mining work normalises, the company should be able to return to its previous growth trends and be more diversified in sector business.
Retail Food Group Limited (ASX: RFG) has a 4.9% dividend yield. It operates such food chain stores as Michel’s Patisserie, Pizza Capers, Wendy’s Ice Cream and Donut King.
In the interim period, net profit after tax was up 18% and the interim dividend was increased 13.2%. Its FY2014 full-year guidance is about a 15% gain in NPAT on FY2013. It has a PE of 15, which is a good match with its 15% profit gain and generous dividend yield.
All three of these companies offer good opportunities for investors. Having a longer view on Super Retail and Monadelphous righting themselves should prove current share prices to be a bargain entry point.
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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.
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