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3 small cap dividend stars for income investors

When it comes to shares with growing dividends, I think the small end of the market is a great place to look.

In this area of the market there are a number of companies with the potential to grow their dividends significantly in the future.

Three which I think are worth a closer look are listed below. Here’s why I like them:

Duxton Water Ltd (ASX: D2O)

Duxton Water is a listed company that gives investors direct access to water through Australian Water Entitlements. These are perpetual rights to Australia’s limited water supply. Current market indications are for high temporary water prices through the 2018/2019 water year compared to prices in the current year, which could bode well for the company in FY 2019. Its shares currently provide a trailing partially franked 3.9% dividend.

Money3 Corporation Limited (ASX: MNY)

Money3 is a secured auto loans company that has been growing its market share at a strong rate over the last couple of years. Despite this growth and the strong profits it is generating, the company only has a 2% share of the secured second-hand automotive finance market. If Money3 can continue its strong form and grow its share of the market, then I suspect its earnings and dividend growth will continue to remain strong. Money3’s shares currently offer a trailing fully franked 3.9% dividend.

Paragon Care Ltd (ASX: PGC)

Paragon Care is a provider of integrated services to Australia’s health care and aged care markets. It recently made a major acquisition which is expected to be highly accretive to earnings in FY 2019. Paragon Care paid a net enterprise value of NZ$54.4 million to pick up New Zealand-based specialised medical distribution company REM Systems. I think this acquisition could put Paragon in a position to grow its dividend meaningfully over the next few years. At present Paragon Care’s shares provide a trailing fully franked 3.6% dividend.

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