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3 top small cap dividend shares with generous yields

When it comes to picking dividend shares I think investors ought to consider some of the quality options at the small-end of the market.

After all, some of these shares have the potential to grow their dividends significantly over the next few years, whereas many of their large cap rivals may at best have to keep their pay outs steady.

Three small cap dividend shares that I think are worth a closer look are as follows:

Baby Bunting Group Ltd (ASX: BBN)

Based on its last close price, this baby products retailer’s shares currently offer investors a trailing fully franked 5.4% dividend. While I suspect that this dividend will remain flat at best in FY 2018 due to margin pressure from the clearance sales of closing competitors, once this short term headwind passes I expect Baby Bunting to win the vacated market share and deliver sizeable profit and dividend growth. This could mean it is worth considering a patient buy and hold investment today.

Money3 Corporation Limited (ASX: MNY)

I have been very impressed at the way Money3 has successfully transitioned away from payday loans to secured auto loans. But despite its early success, Money3 still only has a 2% share of the secured second-hand automotive finance market. Because of this, I think the company has a significantly long runway for growth ahead of it. Which would be great news for its future earnings and dividend growth. In respect to the latter, Money3’s shares provide a trailing fully franked 4.3% dividend at present.

Shriro Holdings Ltd (ASX: SHM)

Shriro is a kitchen appliance and consumer products company which could be well worth a closer look. Despite delivering solid earnings per share and dividend growth over the last few years, Shriro’s shares are still only trading at a lowly 9x trailing earnings and provide a trailing fully franked 8% dividend. While there are concerns that the local market has matured for it, the company is expanding internationally. If that is a success then it could continue its strong run for many years to come.

This fourth dividend share could be just as good and has bucketloads of growth potential in my opinion.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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