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3 high yield dividend shares for income investors

Next month the U.S. Federal Reserve is expected to raise interest rates once again. This could be the second of up to four hikes that the central bank makes this year.

Unfortunately, it is a very different story back home in Australia where most economists have now ruled out a rate rise until mid-2019. Which means the paltry interest rates on offer from bank accounts and term deposits are likely to be here for quite a bit longer.

But don’t worry because the local share market has many high yield dividend shares for investors to choose from. Here are three that I like right now:

Baby Bunting Group Ltd (ASX: BBN)

There’s no denying that FY 2018 will be a disappointing year for Baby Bunting and could mean a slight cut to its dividend. But don’t let that put you off an investment in the baby products retailer. The reason for the underperformance is that Baby Bunting has become a victim of its own success this year. Many of its competitors have closed down, leading to heightened discounting from clearance sales. But this headwind is only expected to be short term and is likely to eventually be a tailwind as the company gobbles up the vacated market share. I expect this to lead to strong profit and dividend growth in FY 2019 onwards. At present Baby Bunting’s shares offer a trailing fully franked 4.9% dividend.

Dicker Data Ltd (ASX: DDR)

This computer software and hardware wholesale distributor could be a great option for income investors. I’m a big fan of the company due to its robust business model, undemanding valuation, growing dividend, and founders with plenty of skin in the game. Another bonus is that Dicker Data pays its generous dividend out in quarterly instalments, making it a great source of income. This year management intends to pay an 18 cents per share fully franked dividend, which based on its last close price equates to a 6.1% yield.

Westpac Banking Corp (ASX: WBC)

While there is a risk that the Royal Commission could find more skeletons in the closet, I am optimistic that the worst is now over for the banks. So the recent weakness in Australia’s oldest bank’s share price could potentially be a buying opportunity for investors with limited exposure to the banking sector. Especially with Westpac’s shares providing a trailing fully franked 6.8% dividend.

Bonus pick.

Because this fourth dividend share is operating in a fast-growing industry, it has been able to grow its dividend by 27% so far this year. I expect more of the same in the second half and in FY 2019.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Dicker Data 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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