Last week, I showed how dividend yields can be truly life changing for long-term investors.
I proved that in a decade from now, the dividend we receive on an investment could easily be double or triple what it is today.
Just imagine for one second if you bought Woolworths Limited (ASX: WOW) in the IPO of 1993 and still held those shares today. You'd be sitting on an annual dividend yield over 55% (assuming a constant share price)!
By identifying companies with reliable and sustainable earnings growth, dividend yields will likely grow.
So if you're planning to invest long term, it's important not to focus on the most popular dividend stocks of today, like Westpac Banking Corp (ASX: WBC) or National Australia Bank Ltd (ASX: NAB).
Instead, try and find smaller companies which will likely grow their dividend payouts for many years to come.
One company which I think will continue to do just that is M2 Group Ltd (ASX: MTU). The owner of Dodo, Primus, Eftel and Commander is making full use of is extensive customer base by cross selling products such as insurance, roadside assistance and more. It trades on a forecast dividend yield of 3.9% fully franked.
Hills Ltd (ASX: HIL) is a technology company which has recently undergone a transformation from a loss-making steel business. Despite quite a high payout ratio, Hills has a good balance sheet and will likely become more profitable over time. It currently trades on a forecast dividend yield of 5.4% fully franked.
Lastly, Genworth Mortgage Insurance Australia Ltd (ASX: GMA) is a mortgage insurance company which is majority owned by Genworth Financial, Inc. A Fortune 500 insurance holding company. Although it has only recently listed on the ASX, Genworth has performed well and is tipped to pay a dividend of 13.9 cents per share in the next 12 months, equivalent to 3.9%.
A better dividend idea than Genworth…
