Whilst a big dividend yield is good, I think dividends with the potential to grow significantly in the future are even better.
Three dividend shares which I think have strong long-term growth prospects are listed below. Here's why I would consider buying them today:
Baby Bunting Group Ltd (ASX: BBN)
Although this baby products retailer's dividend is unlikely to grow in FY 2018, I believe it will accelerate again from FY 2019 onwards. This is because at present the company is expecting to report flat earnings in FY 2018 due to the negative impact of clearance sales from closing competitors. But when this short-term headwinds subsides, Baby Bunting will be in a stronger position and able to grab further market share. At present its shares provide a trailing fully franked 4.7% dividend.
Collins Foods Ltd (ASX: CKF)
This KFC operator's shares have fallen 16% from their 52-week high following the release of a weaker-than-expected half-year result late last year. I don't think the result was as bad as the market reaction has made it out to be, especially given that it was largely due to the impact of some significant one-off charges. In light of this and due to its international expansion plans in an under-penetrated European market, I think Collins Foods would be worth another look now. Its shares offer investors a trailing fully franked 3.2% dividend at the current share price.
Premier Investments Limited (ASX: PMV)
Whilst it may be worth holding off an investment until the release of its upcoming half-year results, if they come in as expected then I think this retail conglomerate could be a great option. At present Premier Investments' shares provide a trailing fully franked 3.9% dividend, but I believe the growth of its key Smiggle and Peter Alexander brands will allow this to grow significantly in the future. The Smiggle brand, for example, is expected to achieve annual sales in excess of $450 million by FY 2020, almost double the sales the brand generated in FY 2017.
