The Motley Fool

3 stocks that pay you to own them

A company’s earnings belong to its shareholders, and for most companies that I own shares in, I like to see some of those earnings paid out to shareholders as dividends.

Dividend-paying stocks tend to outperform those companies that choose not to pay dividends, and that’s why I prefer companies that pay you to own them.

And in this low-interest rate environment when bank deposits will be lucky to pay you 2.3% (excluding bonus interest), investing in shares with dividend yields of more than 5% fully franked is a virtual no-brainer.

Here are three companies that are overlooked by investors but pay out fantastic dividends.

Retail Food Group Limited (ASX: RFG)

One of Australia’s leading franchisors with major brands including Gloria Jeans, Donut King, Michel’s Patisserie, Esquires, Pizza Capers and Crust Gourmet Pizza, Retail Food Group current sports a dividend yield of 4.2%, fully franked. But with a P/E ratio of 17.5x, the master franchisor expects strong growth in the 2017 financial year (FY17), and analysts are expecting dividends of 30 cents per share, compared to 27.5 cents in FY16.

Australian Finance Group Ltd (ASX: AFG)

What’s not to like about this mortgage broker’s 6.9% fully franked dividend yield? At the current share price of $1.21, shares also look reasonably cheap on a P/E of 11.5x. AFG has more than 2,600 mortgage brokers across Australia with access to nearly 1,500 home loan products from 45 lenders. Are Australians suddenly going to turn away from property? Unlikely, which makes AFG a solid prospect.

IVE Group Ltd (ASX: IGL)

The printing group and marketing company is the market leader in its sector and counts some huge companies as clients, including Vodafone, Toyota, Foxtel and Bauer Media Group. Customers tend to hang around too, with its top 20 customers being with the company for an average of nine years. IVE’s shares currently trade on a P/E of 8.7x – despite strong growth being forecast in FY2017. The company also pays a dividend yield of 8.4% – fully franked – and that could increase this financial year.

Discover the 'new breed' of blue chips that could take your portfolio higher

These 3 "new breed" top blue chips to buy now pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

The report is free! No credit card required.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has a position in Retail Food Group. 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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!