3 cheap dividend ideas for 2017

As we head into 2017, interest rates remain at their lowest ever point and, despite the recent election of Donald Trump, appear likely to remain there for some time yet. By contrast, 5% dividends look as good as ever, and here are three of my favourite – cheap! – dividend ideas for 2017:

Thorn Group Ltd (ASX: TGA) – yields 6.2% fully franked

A regulatory inquiry combined with some weaker operating performance recently has hammered Thorn’s share price, and it is valued at around 10 times its annual profits – hence the correspondingly high dividend. Yet the dividend is comfortably covered by the group’s cash flow and even factoring the impact of an expected (although as yet unquantified) regulatory penalty, Thorn looks cheap. Its core business is also growing at modest rates.

Retail Food Group Limited (ASX: RFG) – yields 4.1% fully franked

Although Retail Food shares have risen strongly over the Christmas period, the company still looks attractive given that it trades at around 17 times its annual earnings – just above the ASX average. As a result of the recent rise, its dividend yield is correspondingly lower. Yet given that full benefit is yet to be derived from recent acquisitions and the company recently expanded into several new markets, profits are expected to be higher over the next few years. Dividends should rise accordingly.

G8 Education Ltd (ASX: GEM) – yields 6.7% fully franked

G8 shares have also risen strongly in recent times, and now pays ‘just’ 6.7% instead of the 7% + you could have received if you bought back in October. One caveat; G8 carries a large chunk of debt and has a business model weighted to the second half of the year. The company also appears to have overpaid for some acquisitions, which hurt the share price. Yet earnings and costs have proven remarkably stable in recent years and G8’s quarterly dividends are comfortably covered by earnings. With management having slowed the pace of acquisitions, G8 appears much less likely to blow up from debt and looks an attractive dividend business despite, in my opinion, limited growth potential.

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Big, Fat, Dividends

This company's dividend is almost the stuff of legends. Its reliable cash flows support a high payout ratio, and the company's stash of franking credits are the cherry on the top of the dividend cake. Based on the last 12-months of dividends, shares are offering a fully-franked 6.5% yield, which grosses up to a whopping 9.3%, when those franking credits are included.

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Motley Fool contributor Sean O'Neill owns shares of Retail Food Group Limited. The Motley Fool Australia owns shares of Retail Food Group Limited. 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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