2 overlooked high-yield dividend shares for income investors

When it comes to dividends the first shares which usually pop into the minds of investors are the likes of Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA). But many investors will already have exposure to the big banks, so in order to maintain a diverse portfolio it can be best to look to other areas of the market.

With an average dividend of 4.5%, the Australian Stock Exchange has a good number of shares that provide income investors with great dividends. Two shares which are forecast by analysts to pay an above average dividend in FY 2016 are as follows:

Cash Converters International Ltd (ASX: CCV)

Cash Converters certainly is a risky investment in my opinion and only suitable for those with a high tolerance for risk. As the company is involved in the controversial payday lending industry, there is always a danger that changes to regulations could put a stop to that side of its business.

Recent research shows that over 1 million Australians are estimated to take out a short-term loan each year currently, with the market being worth around $1 billion. The growth in the industry now means that 44% of the company’s revenue comes from personal loans. Any changes to regulations would undoubtedly have a massively negative impact on the company’s performance.

Because of this its shares trade on a low earnings multiple of just over 10x trailing earnings, and are estimated to pay a 7.7% fully franked dividend in FY 2016. But with no regulatory changes known to be forthcoming, this could potentially be an investment with a good risk/reward ratio.

GUD Holdings Limited (ASX: GUD)

GUD Holdings has ridden a rollercoaster of a year so far. It wasn’t that long ago that I was writing about its shares being down 18% for the year, but in the last 30 days they have climbed a massive 21% to break about even for the year.

The recent resurgence in its share price came following an announcement that the company had sold its remaining share in the Sunbeam business to Jarden Consumer Solutions. Its foray into small consumer appliances was largely unsuccessful, so now that the company can focus on its core business I expect an improved performance.

Despite the rally in its share price it is still expected to provide investors with a market-beating fully-franked dividend of 5.7% in FY 2016.

I believe both of these shares, much like these three recent blue chip dividend picks, could provide investors with above-average dividends and the potential for share price gains in the future. For me, this makes them good alternatives to the big banks if you already have a lot of exposure to the banking sector.

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Motley Fool contributor James Mickleboro 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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