2 fast-growing shares I'd buy before Telstra Corporation Ltd

Small-cap shares like Paragon Care Ltd. (ASX:PGC) are growing fast and set to increase their dividends over time.

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The Telstra Corporation Ltd (ASX: TLS) share price has fallen more than 16% for the year-to-date, but I still think investors have far more attractive options to choose from.

Not only is the giant telco struggling to grow its earnings, but the sustainability of its dividend is also under threat. This means the shares are likely to remain under pressure until management can turn the huge ship around.

Since this is unlikely to happen anytime soon, investors might want to consider these two small-cap shares instead:

Baby Bunting Group Ltd (ASX: BBN)

The Baby Bunting share price has been hammered recently and is now trading at just $1.86 – a 42% discount from its 52-week high of $3.21.

Most of the fall can be attributed to a lowering of earnings expectations after management warned that same-store-sales growth would moderate to more reasonable levels over the remainder of the year.

While this was disappointing, I think it is important to note that the baby retailer is still guiding for FY17 EBITDA growth of between 15% to 31%.

On that basis, Baby Bunting is still one of the fastest growing retailers on the ASX and currently offers an attractive risk-reward proposition for investors who want exposure to a niche segment of the retail market.

The shares are currently trading on a forward price-to-earnings ratio of less than 20 and offer a forecast dividend yield of around 3.2%.

Paragon Care Ltd. (ASX: PGC)

Paragon Care is a small-cap healthcare company that specialises in providing medical equipment to hospitals and aged care facilities.

The company has done a good job of integrating acquisitions recently but still stands to benefit from additional synergies that should provide a boost to operating margins.

Although I don't expect Paragon Care to deliver huge increases in profits year-after-year, I think it can be a consistent performer as the needs of the healthcare system continue to grow.

At just 13x earnings, Paragon Care is one of the cheapest healthcare shares on the ASX and also offers a fully-franked dividend yield of around 3.3%.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Telstra Limited. Motley Fool contributor Christopher Georges owns shares of Paragon Care 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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