The downfall of ASX growth shares over the past 18 months has meant many investors have flocked to the safety of dividend stocks.
However, a high yield does not necessarily make a great investment.
This is because a stock might offer outstanding dividend yields because its valuation has fallen. And a point-in-time yield percentage does not say anything about the future prospects of the business.
So in order to pick an income-producing stock that also has sound business fundamentals, the yield might need to come down a tad from the highest on offer.
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8% dividend with excellent growth? Yes, please
SG Fleet Group Ltd (ASX: SGF) is not a name often spoken about, but the company currently offers a chunky dividend yield of 8.15%.
The Sydney company, with a market capitalisation of around $660 million, provides fleet management services.
With a resurgence in private transport since the emergence of COVID-19, the company has posted an impressive performance in recent times.
In fact, during February's reporting season, SG Fleet shares rocketed 10% in just a couple of hours after posting a 41% leap in half-year profit.
"We have demonstrated the strength of our competitive position and our ability to turn the steady stream of new business opportunities into further customer wins and vehicle orders," the company announced at the time.
Add to that a 100% franked dividend stream, and you have yourself a handsome income stock in your portfolio.
Another bonus is that, currently, the share price is trading about 23% lower than it was a year ago, presenting a tempting buying opportunity.
On CMC Markets, all four analysts covering the fleet manager rate the stock as a buy.
Rules are changing for more efficient vehicles
Earlier this month, finance expert and accountant John-Louis Judges named SG Fleet as a stock that's set to benefit from a changing Australian economy.
"Recent changes to the fringe benefits tax for electric and low-emission vehicles in Australia have made it more attractive to lease rather than buy these vehicles, benefiting SGF's business model," Judges said in The Bull.
"There is an expected increase in demand for SGF's services following [a] global… shift towards environmentally friendly vehicles."
He noted how the company operates in Australia, New Zealand, and the United Kingdom.
"SGF's global spread indicates a diversified revenue stream, and allows them to weather any economic downturns or market volatility," he said.
"SGF's ability to adapt to changing market conditions and strong financial performance make it a sound investment choice for investors who may be looking for long-term growth."
