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2 cheap shares yielding over 6% for your income portfolio

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Interest rates recently took another dive, which is likely to put further pressure on savers and would-be retirees, with the best term deposit out there now yielding just 3.3%.

That makes investing in dividend shares a lot more attractive, and fortunately there are a number of beaten-up shares that pay twice as much – or more – than what’s on offer from a term deposit.

G8 Education Ltd (ASX: GEM) – last traded at $4.06, yields 6.1% fully franked

Childcare centre operator G8 Education’s share price has just started to recover in recent weeks, after previously trading as high as $5.70 back in 2014 before fears over the company’s growth model became apparent. Recent results as well as a slowing of acquisition activity have given investors’ confidence that the company won’t over-extend itself, while its quarterly dividend makes it ideal for income seekers.

G8 has recently demonstrated that it can successfully achieve same-centre growth in sales, and there is further potential for upside if management can continue to lift occupancy, which is currently around 80%. Although debt is high, G8’s earnings and balance sheet look stable and should continue to support its delicious 6.1% dividend.

Thorn Group Ltd (ASX: TGA) – last traded at $1.38, yields 8.6% fully franked

Thorn Group recently took a dive after the company announced a revised profit guidance for the year, thanks to the closure of two of its underperforming businesses, TFS Consumer Loans and NCML debt collection. Group full year profit is expected to be around $19 million to $21 million and leaves the company trading on a Price to Earnings (P/E) ratio of around 8.

While dividends might be slightly down or flat, group profit will be more than sufficient to underpin a super-size dividend, and the capital formerly used in the TFS and NCML businesses can be put to work earning higher returns elsewhere. More importantly, Thorn’s closed businesses only represent a small fraction of overall profits, meaning buyers at today’s prices can expect continued high dividends in the future.

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Motley Fool contributor Sean O'Neill owns shares of G8 Education Limited and Thorn Group Limited. 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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