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4 stocks to survive the ‘death of dividends’

The ongoing ‘chase for yield’ has been brought about primarily by the ultra-low interest rates being thrust upon savers around the globe. This low rate situation has meant dividend-paying stocks have enjoyed roaring popularity over the past couple of years. It’s a scenario that looks set to continue for some time yet, however, investors shouldn’t become complacent and think it will last forever….

In fact, the ongoing ‘chase for yield’ should be a cause of concern for risk-averse investors

The reason for concern is that share prices in Australia, the USA, Europe and other regions have been pushed to levels which arguably are well above fair value due to the one-eyed focus on attaining dividend income above all else.

The need for superannuation funds to pay a steady income in an ultra-low interest rate environment is becoming all the more critical given the aging populations across most Western countries. While this demand is unlikely to abate – hence some investors’ complacency – at some point the tide may turn and investors with a portfolio full of over-priced stocks, no matter how high the yield, could find themselves at risk.

With that scenario in mind here are four companies that are expected to grow their dividends at impressive rates. As quality companies with increasing dividends they are set to be the real dividend stocks of the future, unlike the slow-growing, expensive yield stocks of today.

  1. G8 Education Ltd (ASX: GEM) is expected (according to research provided by Morningstar) to boost its dividend from 18 cents per share (cps) for the 2014 calendar year to 25.9 cps in 2015.
  2. AMP Limited (ASX: AMP) which also happens to report on a calendar year basis is forecast to increase its dividend from 25.9 cps to 28.5 cps .
  3. Retail Food Group Limited (ASX: RFG) paid dividends totalling 22 cps in financial year (FY) 2014. This is forecast to rise to 30.3 cps in FY 2016.
  4. Carsales.Com Ltd (ASX: CRZ) paid out 32.1 cps in FY 2014 and dividends are expected to rise to 41 cps in FY 2016.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.


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