When most Aussies think of shares, dividends spring to mind.
And over the past two decades the best dividend-paying stocks have been Australia's big four banks. Indeed, while it hasn't performed quite as well as Commonwealth Bank of Australia (ASX: CBA) in terms of share price growth, National Australia Bank Ltd. (ASX: NAB) is a regular feature in risk-averse investors' portfolios. It's easy to see why.
At today's share price, NAB's share price offers a dividend yield equivalent to 6.7% fully franked. Grossed-up for the tax-effective franking credits, the yield is a whopping 9.6%. Take that term deposits!
Unfortunately, analysts are now raising concerns over the sustainability of all big bank dividends over the medium-term (three to five years). Moreover, in my opinion, the NAB share price appears expensive given the tougher economic outlook and prospects of increased competition.
Therefore, my advice to investors seeking income would be to look to growing companies with an offshore presence.
Currently, one of my favourite growth-cum-dividend stocks on the ASX is Retail Food Group Limited (ASX: RFG). Retail Food Group is the owner of Gloria Jeans, Pizza Capers, Donut King and much more. In my opinion, Retail Food Group, like NAB, will be adversely affected by a slowdown — but to a lesser extent.
Moreover, Retail Food Group's push into foreign coffee markets is a great idea. Any coffee lover who's drunk coffee on an overseas holiday or business trip will know Australia has the best brew.
Despite recent falls in share price, the coffee initiative has already begun to pay off for Retail Food Group's shareholders. Last week, the company reported excellent growth and reaffirmed full-year profit growth of 20% in its 2016 financial year.
Best of all, the discounted Retail Food Group share price offers a forecast 5.7% fully franked dividend yield, according to analysts surveyed by Morningstar.
In summary, an excellent track record for growth, cheap share price, sound overseas strategy and big dividend yield make Retail Food Group shares a strong buy in my book.
