2 companies to consider before Medibank Private Ltd

I’m not very keen on Medibank Private Ltd (ASX: MPL) shares at today’s prices. While a good business with a strong balance sheet, it pays a weak dividend in % terms which I believe is a direct result of the company being fully priced today (the % dividend yield shrinks as share prices rise).

Here are two companies I think could be a better investment than Medibank at today’s prices:

National Storage REIT (ASX: NSR)

National Storage operates a network of self-storage sites, with 100 storage centres across Australia and New Zealand. It’s a boring business, but reliable, and management is lifting occupancy and expanding by acquisition. The company is growing earnings per share at a modest rate, and pays a tasty 6% dividend at today’s prices.

With average occupancy is at 78% in the core portfolio and just 53% in the developing portfolio (less mature centres), National Storage has plenty of room to continue growing organically, as well as by acquisition.

Vocus Group Ltd (ASX: VOC)

Telecom Vocus Group has been smashed along with the rest of the sector in recent times – shares are down 63% in the past 12 months. Yet with a strong collection of assets, a cheap price, and plenty of room to grow its 6% market share, Vocus looks underpriced relative to its opportunity.

The dividend was cut recently to fund integration costs with Vocus’ recent acquisitions, but even at today’s lower levels it reflects an attractive 4.2% yield. With cost-saving synergies still to be achieved from acquisitions, and the disruption coming to the broadband market as a result of customer migration to the NBN, Vocus is in a good position to grow its earnings and dividends.

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A Big, Fat, Fully Franked Dividend

This company's dividend is almost the stuff of legends. Since it started paying dividends in 2007, it has increased its payout to shareholders every single year, a run that includes 21 consecutive dividend increases.

Based on the last 12-months of dividends, its shares are currently offering a fully-franked 4.8% yield, which grosses up to almost 7% when those franking credits are included. And in stark contrast to the likes of Commonwealth Bank and Telstra, this company just increased its dividend by over 13%, and guided for 2017 profits to grow by 20%!

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Motley Fool contributor Sean O'Neill 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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