The stock market has historically returned around 10% a year over the last few decades. This has been great for any investor who has invested in shares.
That 10% return has been from a combination of share price gains and dividends. If an investor can identify stocks that could provide that return almost entirely from dividends, then the business only has to grow with inflation to beat the market.
Here are three businesses with huge dividend yields that could keep growing (slowly) over the coming years:
G8 Education Ltd (ASX: GEM)
G8 is one of Australia’s largest childcare providers with a market capitalisation of $1.47 billion.
It has successfully utilised an acquisition strategy to grow its portfolio to over 500 centres across Australia and Singapore. Every centre that it acquires adds to the economies of scale that the company enjoys.
There is a decent chance that G8 may expand into China, which could be a huge growth market. G8 is currently trading at 12.6x FY17’s estimated earnings with a grossed-up dividend yield of 9.42%.
Mortgage Choice Limited (ASX: MOC)
Mortgage Choice is one of the biggest mortgage brokers in Australia with a market capitalisation of $280 million.
It has a network of over 460 outlets which contributed to Mortgage Choice growing its cash earnings per share by 16% and its dividend by 6.3% in its latest results to 31 December 2016.
Mortgage Choice is currently trading at 14x FY16’s earnings with a grossed-up dividend yield of 10.8%.
Retail Food Group Limited (ASX: RFG)
Retail Food Group is the master franchisor behind names such as Donut King, Gloria Jean’s and Crust Gourmet Pizza. It currently has a market capitalisation of $961 million.
The share price has been under pressure in recent months due to the rising number of franchisee outlets that are closing.
Retail Food Group is expanding overseas nicely, particularly into Asia. This could make up for the closures in Australia. In the latest results management revealed that earnings per share had grown by 8.3%.
It’s currently trading at 13.4x FY16’s earnings with a grossed-up dividend yield of 7.68%.
I think all three of these businesses could be good options for dividend hunters, although there are risks with each. Out of the three, I think Retail Food Group is most likely to beat the market at the current price.
For stocks that will provide market beating returns through share price growth, you should read this report.
For many, blue chip stocks means stability, profitability and regular dividends, often fully franked..
But knowing which blue chips to buy, and when, can be fraught with danger.
The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2017."
Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.
If you’re expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you’ll be sorely disappointed. Not only are their dividends growing at a snail’s pace, their profits are under pressure too due to the increasing competitive environment.
The contrast to these “new breed” blue chips couldn’t be greater… especially the very real prospect of significant share price gains, something that’s looking less likely from the usual blue chip suspects.
The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.
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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Retail Food Group Limited. Motley Fool contributor Tristan Harrison 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.