Although blue chip shares such as Telstra Corporation Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW) offer investors generous dividends, I don't expect much by way of growth from them in the short-term unfortunately.
So if you're on the lookout for dividends that have strong growth potential I would suggest you check out the three small cap shares listed below. Here's why I like them:
Baby Bunting Group Ltd (ASX: BBN)
This baby products retailer currently has a market capitalisation of approximately $190 million after a 25% decline in its share price over the last 12 months. This decline was the result of Baby Bunting suffering from the clearance activities of its closing competitors. While this means FY 2018 will be a disappointing year for the company, I expect it to be just a short-term headwind that could turn into a tailwind in FY 2019 when competition lessens. This may allow the company to grow its dividend again next year. At present Baby Bunting's shares provide a trailing fully franked 4.9% dividend.
Collection House Limited (ASX: CLH)
Collection House is a receivables management company on the rebound after a couple of tough years. Business has been booming so much that Collection House recently revised its guidance for FY 2018. It now expects earnings per share of 18 cents to 18.5 cents, representing growth of up to 24% on FY 2017. Based on the company's traditional payout ratio of approximately 55%, this could mean a dividend of around 10 cents per share. This equates to a sizeable 6.7% yield based on its last close price.
Money3 Corporation Limited (ASX: MNY)
Money3 is a financial services company which has successfully pivoted away from payday loans to secured auto loans. Although the company's loan book has been growing at an impressively strong rate, it still only has a very small share of the secured automotive finance market. If the company can continue its fine form, it could have a significant runway for growth ahead of it. Which could make it a real dividend star of the future. At present Money3's shares offer a trailing fully franked 3.8% dividend.
