3 companies I’d buy for big dividend yields in 2018

Australian investors have long sought income from big dividend stocks. Here are three companies that I would buy today for the forecast dividend yield in 2018.

Genworth Mortgage Insurance Australia (ASX: GMA)

Genworth provides Lenders Mortgage Insurance in Australia. As a Lenders Mortgage Insurance provider, Genworth takes on the risk for residential home loans for which they provide insurance. These loans are predominantly high loan-to-value ratio residential loans. Genworth has relationships with many home loan providers, including 3 of the 4 big banks.

Analysts have forecast a fully franked dividend of 20 cents per share. This amounts to a dividend yield of 8.7% at the current share price of $2.29 before any franking credits are considered. Such a large dividend would require a payout ratio of 87% on the forecast earnings per share of 23 cents. However, Genworth has a history of paying out a large majority of the earnings in dividends so this wouldn’t be unusual.

G8 Education Ltd (ASX: GEM)

G8 Education is a provider of early childhood education and childcare in Australia. It operates through a wide range of brands in the early learning and childcare space.

Analysts have forecast a fully franked dividend of 20 cents per share in 2018. With recent declines in the share price, this amounts to a dividend yield of 7.3% before franking credits. With forecast earnings of 23 cents per share, this would require a payout ratio of 87% and the company has been well above this in the recent past.

Super Retail Group Ltd (ASX: SUL)

Super Retail Group own and operate a number of Australian retail brands including Rebel Sport, Supercheap Auto, Ray’s, and Boating Camping and Fishing. Combined, Super Retail Group operates over 630 stores across Australia, New Zealand and China.

Recent declines in the share price have made the dividend yield attractive. At the current price of $6.62 per share, the forecast dividend of 47 cents per share equates to a dividend yield of 7.1%. The dividend is fully franked. With a required payout ratio of 67% on the forecast earnings of 70 cents per share, the dividend is well within the range of what the company has done in the past.

Foolish takeaway

If I was investing for income, I’d be happy to put my money into these 3 companies today. While forecasts do not guarantee that the dividend will materialise, I believe that the yield being offered is attractive enough to buy at the current prices.

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Motley Fool contributor Stewart Vella has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended G8 Education Limited. 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 Scott Phillips.

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