3 small cap dividend shares on my shopping list

When it comes to dividends most investors will head straight to the large end of the market to companies such as Wesfarmers Ltd (ASX: WES) and Woolworths Group Ltd (ASX: WOW).

While these are fine choices, I think investors that stick purely to these types of companies are missing out on some potential dividend stars of the future at the small end of the market.

Three shares which I think have the potential to grow their dividends significantly in the future are listed below:

1300 Smiles Limited (ASX: ONT)

I think this dental practice operator is a good option for patient investors. Although the dental industry is experiencing tough trading conditions at present, I believe this is only a short term headwind and expect things to improve in the long-term. Pleasingly, despite the tough trading conditions, in February 1300 Smiles delivered a solid 4% increase in half-year net profit after tax. This allowed management to lift its interim dividend, meaning that its shares provide a trailing fully franked 3.6% yield now.

Money3 Corporation Limited (ASX: MNY)

This financial services company is probably my favourite small cap dividend share right now after it successfully transitioned away from pay day loans to secured auto loans. This successful move led to the company reporting a 12.3% increase in half-year net profit after tax to $15.5 million. The good news is that I think there will be more of the same over the next few years. After all, Money3 only has a 2% share of the secured second-hand automotive finance market at present, affording it a long runway for growth. The company’s shares provide a trailing fully franked 4.4% dividend.

Sealink Travel Group Ltd (ASX: SLK)

This provider of ferry services in key tourist hotspots such as Sydney Harbour and Kangaroo Island looks set to be a big winner from the Australian tourism boom. Although rising oil prices could be a short-term headwind, I remain confident that demand for its ferries will grow more than enough to offset this. At present SeaLink’s shares offer investors a trailing fully franked 3.7% dividend.

Lastly, here are a few more top shares that are raising their dividends right now. This could make it an opportune time to snap them up.

Breaking news: ASX companies set to raise dividends!

It's been a nail-biter of a reporting season here in the first half of 2018.

But the real action, in my opinion, is what companies are doing with dividends.

What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended 1300SMILES 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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