Most SMSF investors hold at least one of the big four banks, but for diversification sakes should also hold a mix of small to medium shares in the portfolio too.
The banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) appear to have great dividend yields of between 5.4% and 7.3%, but those dividends could be cut in future.
That would not only lead to lower dividend yields, but could also see their share prices sink, resulting in a double hit – particularly to those investors relying on the yield for income.
Here are 5 diversified companies that could have more dependable dividends than the big four banks…
Reef Casino Trust (ASX: RCT)
Reef Casino Trust owns the casino and grounds in Cairns, and is currently paying a dividend yield of 8.2% unfranked at the share price of $3.65. The trust has paid consistent dividends over the past decade, with dividend yield averaging 9.3%. Reef Casino has a market cap of $179 million.
Automotive Holdings Group Ltd (ASX: AHG)
Automotive Holdings owns a diversified array of motor dealerships around Australia and one of the largest refrigerated logistics businesses in Australia. At the current price of $3.78, the company is paying a dividend yield of 5.9%, fully franked. Additionally, the recent selloff means shares are 16% cheaper than they were at the start of the year. Automotive Holdings has a market cap of $1.2 billion.
Mortgage Choice Limited (ASX: MOC)
The mortgage broking and financial planning business is currently paying a fully franked dividend yield of 9.2% fully franked, and has consistently paid strong dividends. Shares also look cheap having fallen from a high of $2.69 suggesting further capital gains ahead. Mortgage Choice has a market cap of $216 million.
Contango Microcap Ltd (ASX: CTN)
The listed investment company is currently sporting a partly-franked dividend yield of 6.8% at the current price of 92.7 cents. Contango has a solid history of beating the market with its investments and paying high yileds, adds instant diversification to any portfolio and appears to be trading at a substantial discount to its net tangible asset backing after tax (The last ASX update on May 4 was $1.065). Contango has a market cap of $151 million.
Dicker Data Ltd (ASX: DDR)
Dicker Data is a founder-led distributor of computer hardware, software and related products. At the current share price of $1.84, Dicker Data is yielding 8.4% fully franked and pays its dividends on a quarterly basis (great for those looking for regular income). Dicker Data has a market cap of around $295 million.
All five companies could be valid inclusions in an income-directed portfolio, thanks to their large and consistent dividend performance over many years.
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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.