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Why I would buy these growing dividend shares

Although I think income investors ought to grab hold of the Telstra Corporation Ltd (ASX: TLS) and Westpac Banking Corp (ASX: WBC) dividends whilst they can due to the generous yields they provide, I’ll be the first to admit that I don’t expect much growth (if any) from them in the short term.

So investors looking for dividends with the potential to grow over the long-term might be better looking outside the banks and the telco sector.

Two shares which I’m tipping to grow their dividends strongly over the next decade are listed below. Here’s why I like them:

Baby Bunting Group Ltd (ASX: BBN)

Although I don’t expect a dividend increase this year from this baby products retailer due to the short-term headwinds brought about by clearance sales from the closure of some of its competitors, I believe that from FY 2019 onwards the company’s dividend could grow meaningfully as its margins expand and the vacated market share is gobbled up. The good news in the short-term, though, is that at present Baby Bunting’s shares still provide a market-beating fully franked trailing 4.8% dividend. I think this makes it a great option for income investors today.

Premier Investments Limited (ASX: PMV)

At present this retail conglomerate’s shares provide investors with a fully franked trailing 3.8% dividend. But thanks to the impressive growth of its Smiggle and Peter Alexander brands, I believe Premier Investments is capable of growing both earnings and its dividend at a solid rate of the medium term. However, its half-year results are due to be released next week. While I expect another strong result from Premier Investments, I do think it would be prudent for investors to wait for these results to be released before snapping up the company’s shares.

This third dividend share may not have as big a yield as Baby Bunting or Premier Investments, but I believe it has huge growth potential in the future.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited and Telstra 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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