When it comes to making buy and hold investments, I believe one thing in particular that investors ought to look out for is whether a company has the ability to grow its dividend strongly in the future.
A company that grows its dividend at an above-average rate can turn an average yield into a fantastic yield in just a few years.
Three shares which I believe are capable of doing this are listed below:
Blackmores Limited (ASX: BKL)
Although this health supplements company was forced to cut its dividend in FY 2017, it is widely expected to return to growth again this year. At present Blackmores' shares provide investors with a trailing fully franked 2.2% dividend, but I believe this could rise significantly over the next few years to become a meaningful part of an income investor's portfolio.
Helloworld Ltd (ASX: HLO)
At present this travel company's shares offer investors a trailing fully franked 3% dividend. With management confident that demand for its integrated service offering will continue to develop and grow, I feel Helloworld could be a real dividend star of the future. In FY 2018 EBITDA is forecast to increase upwards of 21% year-on-year. I believe its dividend could grow at a similar rate.
Premier Investments Limited (ASX: PMV)
Due to the international expansion of Smiggle and the strong growth of its Peter Alexander brand, I believe this retail conglomerate is in a great position to deliver above-average earnings growth over the next few years. This should allow the company to continue to grow its already generous dividend, which currently provides investors with trailing fully franked 4% yield.
