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2 growing small cap dividend shares to buy

Although I think Westpac Banking Corp (ASX: WBC) and the rest of the banks are great options for income investors right now due to the low multiples they trade on and the generous dividend yields they offer, I’ll be the first to admit that I don’t expect much by way of dividend increases over the coming years.

So, if you’re looking for shares that have dividends that could grow at a solid rate over the coming years, I think you need to look beyond the banks and blue chip shares to the small end of the market.

Here are two top shares that I think could grow their dividends at a strong rate over the coming years:

Adairs Ltd (ASX: ADH)

Although as a home furnishings and linen retailer Adairs has meaningful exposure to the housing market, its business has yet to be impacted by falling house prices. In fact, business has been booming again in FY 2019 with solid like for like sales growth year to date. In light of this, management recently reiterated that it expects to achieve earnings before interest and tax growth of between 4.9% and 13.7% this year. I believe this puts Adairs in a great position to continue growing its dividend which currently offers a massive trailing fully franked 7.9% yield.

Paragon Care Ltd (ASX: PGC)

Paragon Care is a medical device, equipment, and product distributor which has come under pressure recently after a trading update fell short of expectations. Management advised that it had achieved 7% organic growth year to date in FY 2019, compared to its target of 10%. In addition to this, its operating costs were running at around 30% of revenue for the first four months compared to its target of 26%. While this is slightly disappointing, I think the selloff has been overdone. Especially given the low multiples its shares trade on, its bright long-term growth prospects, and its generous dividend. Paragon Care’s shares currently offer a trailing fully franked 5% yield.

These 3 stocks could be the next big movers in 2020

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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