When it comes to dividends there's nothing better than one that grows at a strong rate. When companies grow their dividends quickly a good yield turns into a fantastic yield for investors willing to buy and hold.
Let's take my favourite dividend share Retail Food Group Limited (ASX: RFG) as an example. If you invested in its shares nine years ago when the share price was $1.60, you would have received a fully franked 6.2 cents per share dividend that year. That works out as a good (but not great) 3.8% dividend.
Fast-forward to today and not only has the share price increased 351%, but the company is expected to pay a fully franked 30 cents per share in dividends in FY 2016 according to CommSec. This means that you would be receiving a whopping yield on cost of 18.7%.
So if you had invested $50,000 in Retail Food Group's shares nine years ago, you'd be receiving a fully franked dividend worth $9,375 this year. I believe this fantastic yield demonstrates how patient buy and hold investors can profit greatly if they invest smartly.
In light of this I've picked out four shares which I believe could provide investors with similar dividend growth in the future. Here they are:
Blackmores Limited (ASX: BKL)
The vitamin maker's shares currently pay a fully franked 2% dividend. Having grown its dividend by an average of 13% per annum for the last 10 years, I would fully expect this level of growth to continue thanks to the rising demand for its products in the China market.
MNF Group Ltd (ASX: MNF)
The owner and operator of the My Net Fone brand has grown its dividend by an average of over 50% per annum for the last five years. Although only a small fully franked 1.2% dividend at present, thanks to the increasing demand for VoiP services this could be one that it pays to be patient with.
SEEK Limited (ASX: SEK)
The shares of SEEK may only provide a fully franked 2.2% dividend at present, but it has been growing this dividend at an average of 18% per year for the last 10 years. The strong growth prospects the company has makes it a great long-term buy and hold investment in my opinion.
WAM Capital Limited (ASX: WAM)
This fund manager has grown its dividend by over 12% in the last five years. With a market-beating fully franked 6.2% dividend today, this could be a great time to get on board in my opinion. At 16x trailing earnings its shares are trading a little under the sector average also.
