Did you know a company's dividend of 7.3% can turn $100 into over $200 after just 10 years?
Imagine if, in addition, the company's share price continued to grow over the decade. The returns would be fantastic. Couple in the added benefit of franking credits, it's easy to see why so many people choose the stockmarket as the incubator for growing their retirement nest egg.
However, investors shouldn't make blue chip stocks like Telstra Corporation Ltd (ASX: TLS) or BHP Billiton Limited (ASX: BHP) the focus of their attention because there are so many other companies in the S&P/ASX 200 (ASX: XJO) (^AXJO) which offer the same, if not better, dividend yields.
Unfortunately, it's not as easy as it sounds to find good companies and capital gains can quickly turn into capital losses. Dividends are never guaranteed. That's where your valuation and stock-picking expertise comes into play.
Below are five companies which I believe will, over time, greatly increase their dividends as their earnings grow higher and higher. What some lack in dividend yield they'll make up for in growth over the long term and with proven track records for returning excess funds to shareholders, they stand a great chance of doubling your money in the next decade.
1. Macquarie Group Ltd (ASX: MQG) is Australia's premier investment bank. With expertise in niche finance areas and improving confidence in global markets, it is forecast to pay a dividend equal to 4.9% of its current price, over time its earnings and payout will increase.
2. Pacific Brands Limited (ASX: PBG) is the owner of names such as Bonds, Mossimo, Hard Yakka and Berlei – just to name a few. Over the past 10 years earnings have grown at 9.3% p.a. and, in the next year, it is forecast to pay a 7.4% fully franked dividend.
3. Ardent Leisure Group (ASX: AAD) is the owner of Dreamworld, White Water World, AMF and Kingpin Bowling, Goodlife health clubs and a number of other businesses in Australia and the United States. It is forecast to pay a 4.9% dividend in 2014.
4. Cash Converters International Ltd (ASX: CCV) is a small but rapidly growing iconic Australian business. With its reputation and presence growing throughout the United Kingdom, South America and New Zealand, earnings will grow higher over time. Although it's forecast to pay a 3.75% dividend in the next year, analysts are expecting it grow strongly in the near future.
5. Cromwell Property Group (ASX: CMW) is a Real Estate Investment Trust (REIT) with properties right around the country. It is has an impressive track record for growing earnings and is forecast to pay a 7.5% dividend in 2014.
