How are your dividends looking in April? This month is when most of the companies send out dividend payments to shareholders and the recent growth in average dividends has been attractive.
If you're just starting out in investing and don't have a lot of dividend income built up, you will want to devote a certain part of your portfolio and planning to this goal. New investors will be drawn towards high yields, but low-yield stocks that grow dividends at above average rates can be just as profitable.
You should also check a company's dividend payout ratio. That's the percentage of earnings per share (EPS) paid out as dividends. A company will keep a certain proportion of earnings to grow the business, but they usually stick with a regular level of dividend payout as well.
A company with a steady payout ratio and solid earnings growth should have comparatively good dividend growth.
Here are two growth stocks with good track records for dividend growth that could be good additions to your expanding income portfolio.
Private hospital operator Ramsay Health Care Limited (ASX: RHC) has raised annual earnings in the double digits over the past five years. Several overseas acquisitions in France, and business development in its Australian hospital network, have kept earnings growth high. Likewise, since 2009 dividends have more than doubled. Its next major step is expanding into the Chinese healthcare sector, so this growth story can keep on going. The stock pays a 1.4% yield fully franked and dividends are forecast to grow in the high teens for the next several years.
Suncorp Group Ltd (ASX: SUN) is another attractive dividend grower. The insurer and banker operates brands like AAMI, Vero, GIO and Shannons car insurance, which cover a wide variety of life and general insurance. What makes Suncorp especially good for dividend investors is its record for paying special dividends along with its regular dividend increases. It has paid three special dividends in as many years. There could be more to come because Suncorp intends to return surplus capital in excess of its conservative operating targets to shareholders. In the last five years, the insurer has raised dividends on average about 11% annually. The stock currently yields a whopping 6.1% fully franked. Suncorp could be a solid dividend generator for your long-term portfolio.
