While blue chip stocks such as National Australia Bank Ltd (ASX:NAB) and Telstra Corporation Ltd (ASX:TLS) are well known for paying large dividends, there are also a number of small cap companies on the Australian market that offer investors big dividends.
Here are two such stocks.
Dicker Data Ltd (ASX:DDR)
Dicker Data is the largest Australian owned Information and Communications Technology distributor in Australia and New Zealand. The company saw total revenue grow by 7.1% to $632.4 million for the June half year on the back of market share growth from its existing vendor portfolio and new vendor additions. The company has recently lost its Cisco contract in New Zealand but management expects that growth from new vendors recently announced will fill the Cisco gap for the second half. Profit before tax increased by 7.3% to $19.4 million for the June half with margins flat at 3.1%. Management has forecast that full year profit before tax will be around $40 million.
The company has a high payout ratio (99% in 2016) and pays shareholders quarterly dividends that are fully franked. With the stock enjoying significant capital appreciation over the last few months the company's dividend yield has now dropped to 5.47%.
DWS Ltd (ASX:DWS)
IT services provider DWS increased earnings per share in FY17 by 5.5% on the prior corresponding period to 13.4 cents. Management has done a good job growing the bottom line in the increasingly competitive IT services sector. DWS reported a 4.9% decline in revenue to $137.4 million for FY17 due to reduced demand from a large client and fewer contractors. The company's focus on productivity and matching consultant numbers to client demand led to EBITDA margins rising from 17.9% to 19.6% which helped grow its bottom line despite the drop in revenue.
The company pays most of its earnings out as dividends with a 75% payout ratio. Excess cash flow after dividend payments is used to pay down debt, with net debt dropping to $4.1 million at year end. The dividends are fully franked and at current prices the company has a dividend yield of 6.64%.
