A high yield is great, but it can lead us astray if the yield is all we focus on.
While the income today might be great, if the dividend doesn’t grow, then the income has less purchasing power each year due to inflation.
What we really want is a solid income which can grow over time to at least keep up with inflation. Here’s a couple of shares to continue to deliver on that front…
Spark Infrastructure Group (ASX: SKI)
Spark owns regulated utility assets, focusing on electricity networks. The company has interests in multiple networks, including Victoria Power Networks and SA Power Network.
The company again delivered a solid result recently, with cashflow growing by 6.9% during the first half of 2018. Being a regulated monopoly, Spark has very predictable cashflows and pays much of it to shareholders as distributions.
It has increased payments to shareholders for the last 7 years in a row and Spark has forecast another increase this year of 4.9%.
At the current price, shares trade on a distribution yield of 6.8%.
Viva Energy REIT Ltd (ASX: VVR)
This property trust is relatively new to the ASX, having listed around 2 years ago. Viva Energy REIT owns a large portfolio of over 400 service stations around the country.
Most of the properties are located in higher-traffic metropolitan areas and almost entirely leased to Shell Coles Express. Leases are currently locked in for an average of 13 years, with 3% per annum fixed rental increases.
The portfolio is 100% occupied and Viva Energy plans to acquire further well-located sites to grow its portfolio further. Gearing is a comfortable 32% and the distribution is expected to increase by 3%-3.75% this year.
I’d much prefer this property business over the likes of BWP Trust (ASX: BWP) for example, which is currently struggling to grow its earnings much at all.
Viva Energy REIT currently trades on a forecast yield of 6.3%.
Both businesses have predictable earnings, which enable them to pay a reliable stream of income to shareholders. With a bit of growth built-in, a decent total return can be achieved through shares like this. If you’re looking for companies with faster dividend growth, check out the free report below.
It's been a nail-biter of a reporting season here in the first half of 2018.
But the real action, in my opinion, is what companies are doing with dividends.
What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.
Motley Fool contributor Dave Gow owns shares of Viva Energy Ltd. 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.