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3 ingenious dividend companies for a blue-chip retirement

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Hear that quite murmur? It’s the sound of the economy cooling.

The pot has come off the boil and the thermostat that is the S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) is edging down like a cold winter’s night.

But if a comfortable retirement supported by growing dividends is your end game, this could be a great buying opportunity.

The recent high profile earnings downgrades for Woolworths Limited (ASX: WOW) and Flight Centre Travel Group Ltd (ASX: FLT) have been a wake-up call for many investors that slowing economic momentum will result in an increase in competition for customers and pressure on margins.

But the fallout of these profit warnings spread far wider than the two companies involved.

Many consumer, retail and financial companies also saw their prices fall in anticipation of more pain ahead. This represents an opportunity for canny dividend investors looking to stock up on cash producing companies. Yields are finally rising! The trick is to find companies where earnings can also be maintained.

Here are three companies I would consider for their attractive dividends today;

1. Money3 Corporation Limited (ASX: MNY)

Consumer lending company Money3 Corporation has fallen out of favour with investors worried about the small loans industry and consumer spending, but looks too cheap to ignore.

The company’s board has noted that “the current share price does not adequately reflect the value of the Company” and has pledged to buy-back up to 5% of the issued capital with its cash. This will return cash to shareholders and reduce the risk of the company becoming a takeover target.

The buy-back is in addition to the current 4% dividend yield and on top of a forecast growth in Net Profit Before Tax (NPBT) of 81% for the full year 2015 which has been aided by acquisitions.

2. Primary Health Care Limited (ASX: PRY)

Shares in healthcare provider Primary Health Care have pulled back about 5% in the last month which has pushed the dividend to almost 4%. Although this is not huge, it is relatively strong as far as healthcare companies go and is sustainable.

Primary Health Care will be a big beneficiary from the ageing population trend and increasing healthcare spending. Revenue grew by 6.1% for the first six months of 2015 and the company is expecting a huge one off tax refund from the Australian Tax Office of around $130 million.

3. Challenger Ltd (ASX: CGF)

Challenger is another company set to win from Australia’s shifting age demographic. As the retirement population swells, there will be growing demand not only for healthcare, but also for regular annuity income streams which Challenger provides.

Challenger has a strong history of growing dividends and the current 4% yield should rise along with earnings. The group has a targeted payout ratio of 45%-50% of after tax earnings.

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Returns As of 6th October 2020

Motley Fool contributor Regan Pearson has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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