3 surprising dividend stocks I'm betting on

Spoiler alert: Telstra Corporation Ltd (ASX:TLS) is out and Santos Ltd (ASX:STO) is in. But which two other stocks am I betting on?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I love the reward of collecting a big dividend cheque.

The extra passive income for little extra work is a great way to grow my portfolio and keep the returns compounding. Happy days.

However the big problem with some of the 'All-Star' dividend-paying companies like Telstra Corporation Ltd (ASX: TLS) is that investors have bid up the underlying share price in order to secure the dividend, making the value of the shares less attractive.

To get around this we can identify those companies which are likely to be strong dividend payers in the coming years and buy them today at cheaper prices, securing both the dividend AND the discounted share price. Here are three surprising companies I think could be set to do just that:

Cover-More Group Ltd (ASX: CVO)

Insurance group Cover-More is surprising mainly because it does not currently pay a dividend. However this is set to be corrected in the near future.

The company has stated its first dividend will be determined based on the first six months of the 2014 calendar year and it could be a good one.

Cover-More has already announced a prospectus-beating pro-forma EBITDA result for the full year of $50.1 million, up 22% on FY13. And this could be just the start as Cover-More expands its commercial travel insurance offerings into China – the world's fastest growing travel market.

Santos Ltd (ASX: STO)

In a similar way to Cover-More, Santos currently underwhelms in the dividend stakes.

This is set to change too as new projects flood the company with cash-flows which are expected to more than double over the next two years.

Some of this will be directed towards paying down debt on its PNG LNG and GLNG projects, but the company has stated it also expects to reward investors with a progressive dividend policy.

Santos could soon be regarded in the same fashion as Woodside Petroleum Limited (ASX: WPL) when it comes to dividends, and buying shares in the company today in anticipation could help to secure future dividends at a lower price.

FlexiGroup Limited (ASX: FXL)

This consumer lending company has the highest dividend yield of the three companies at 4.4%. FlexiGroup grew cash NPAT 18% for FY14 and increased its dividend 14%. This strength not only drives higher dividends, but also capital growth in the company's share price over time.

The consistency of FlexiGroup's cash-flows means it can already provide guidance around FY15 profit and is forecasting NPAT growth of up to 7%.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »