Income is a very important part of returns for a lot of people. Dividends are generally less volatile than share price movements and can represent some, if not all, of a person’s income in retirement.
If I were to invest in dividend shares I’d want to go for businesses that have reliable dividend histories and have every chance of growing at a good rate over the coming years.
But, the potential dividend ideas also have to pay a good yield, or else I may as well keep cash in the bank.
Here are three ideas:
Naos Emerging Opportunities Company Ltd (ASX: NCC)
This is a listed investment company (LIC) that invests in shares that have market capitalisations less than $250 million, those shares are usually industrial companies. I like this LIC because it invests at least for the medium-term, if not the long-term, into shares that have long-term potential.
Over the past five years its portfolio has averaged 17.09% per annum before fees, which is a good performance in anyone’s book. Why is it a good dividend stock? It has increased its dividend each year since it started paying dividends in the second half of FY13. It currently has a grossed-up dividend yield of 7.85%.
Australian United Investment Company Ltd (ASX: AUI)
AUI is another LIC, but this one is a lot older. This one has been going since 1953 when it was set up by Sir Ian Potter.
It invests in all the usual blue chip shares like Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Wesfarmers Ltd (ASX: WES).
Its returns haven’t been as strong as Naos but it has a dividend growth or maintained streak almost as old as I am, going back to 1992. In other words, if you invested in 1992 the dividend hasn’t been decreased for at least 26 years.
AUI currently has a grossed-up dividend yield of 5.8%.
National Storage REIT (ASX: NSR)
National Storage is the largest self-storage provider in Australia and New Zealand. Self-storage is going through a bit of a boom at the moment. The price of residential real estate has gotten so high that it is far more economical to rent a National Storage unit to store items in than it would be to put it in a spare bedroom which could cost hundreds of thousands of dollars for that extra bedroom in the house.
National Storage has increased its distribution each year since 2014 and it currently has a trailing distribution yield of 5.79%.
All three are good dividend options in my opinion. If you want to play it ‘safe’ then AUI is probably the best bet but I think the Naos is the best dividend option because it’s investing for strong growth, it has the biggest yield and it is increasing its dividend at the fastest rate out of the three.
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Motley Fool contributor Tristan Harrison owns shares of NAOS EMERG FPO. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended National Storage REIT. 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.