Health insurers like Medibank Private Ltd (ASX: MPL) and NIB Holdings Limited (ASX: NHF) are perennially popular among dividend seeking investors, who perceive that health care demand is only going to rise.
That's probably a pretty good guess, and insurers benefit from legislated increases in their premiums each year to ensure that they can keep up with demand. However, the sheer popularity of insurers has meant that they simply aren't that lucrative to own – Medibank pays a 4% dividend, while NIB's is a measly 3.3%.
Instead, investors could consider owning:
Super Retail Group Ltd (ASX: SUL) – a diversified retailer which owns the BCF, Rebel Sports, and Rays Outdoors brands, and pays a 5.7% fully franked dividend.
Retail Food Group Limited (ASX: RFG) – the franchise owner of Donut King, Brumby's, Michel's Patisserie, Crust Pizza, and many more popular franchises. Retail Food Group pays a 7% dividend, although it has become too risky for me and I recently sold my shares
IPH Ltd (ASX: IPH) – an intellectual property (IP) and trademark law firm operating in south east Asia. IPH expects to grow its core trademark business, and it is also investing in a growing app that streamlines the workload for IP firms. Pays a 4.9% dividend.
It's important to remember that dividends aren't the only thing to keep in mind when purchasing a company. Always bear in mind the old adage 'the closer the dividend gets to 10%, the closer it gets to zero' which refers to the fact that investors will often price in a dividend cut (by selling shares, which lowers the share price and leads to a higher % dividend yield) well before management actually cuts the dividend.
Telstra Corporation Ltd (ASX: TLS) for example, is a company that recently slashed its dividend, and today appears to have a trailing dividend of nearly 9% – but will be more like 5% going forwards.
