In a low growth environment (which is what Australia is facing), savvy investors seek the dividend stocks of tomorrow – not today.
Indeed, while Commonwealth Bank of Australia (ASX: CBA) and BHP Billiton Limited (ASX: BHP) were the best dividend stocks of yesteryear, they will not be the best dividend stocks of tomorrow in my opinion. Frankly, I think their growth outlooks are concerning.
To unearth the best dividend stocks, I think investors should look a little further down the market. After all, smaller companies boast the longest growth runways.
Then, filtering your search for prospects that are profitable, have a proven track record of growth, savvy leadership, good economics, the propensity to pay dividends and international exposure is a must.
The next three companies pass the filter with flying colours.
- Retail Food Group Limited (ASX: RFG) is the owner of coffee chains such as Gloria Jeans, Cafe2u and much more, plus it owns popular retail food outlets like Crust Pizza, Pizza Capers and Donut King. Retail Food Group is growing its presence in the coffee market globally, but can also find cash to pay a very healthy dividend. In the year ahead, analysts expect the company to pay a dividend of 5.5% fully franked, according to Morningstar.
- Flight Centre Travel Group Ltd (ASX: FLT) is no longer a small company, given its market capitalisation now totals an impressive $3.6 billion. The company is already the leader in the Australian leisure travel market. But while it is growing in the lucrative corporate travel market locally, Flight Centre's top growth prospects are overseas in Europe and the USA. With loads of cash on its balance sheet, Flight Centre's 4.4% fully franked dividend yield appears sustainable.
- Altium Limited (ASX: ALU) is a globally diversified developer of software used to design and create printed circuit boards (PCBs). PCBs form the backbone of the world's technology systems. Altium records revenue in US dollars and has achieved an incredible average annual total shareholder return of 39.1% in the past decade. With a 3.3% unfranked dividend to boot, Altium shares are worth watching closely.
Buy, Hold or Sell?
At today's prices, I'd buy each of these companies for an investment over the long-term. My favourite for new money is Retail Food Group because its share price has been punished by the market in recent months.
