If you are seeking big dividend income from shares in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), perhaps it is time to try National Australia Bank Ltd (ASX: NAB), G8 Education Ltd (ASX: GEM) and WAM Capital Limited (ASX: WAM) on for size.
These companies' shares are forecast to offer big dividends, yet trade at seemingly modest valuations.
National Australia Bank
NAB is one of Australia's largest business banks with around a 22% share of small businesses and 32% of medium businesses. The bank also controls around 13% of the investor loan market and 12% of mortgages for homeowners. Each of these offerings are key growth areas for the bank. With the recent divestment of non-core assets, NAB now has a more lean and focused structure. In the year ahead, it is forecast to pay a dividend equivalent to a yield of 6.5% fully franked.
G8 Education
Despite pursuing a successful (so far!) growth-by-acquisition model, shares of Australia's largest listed childcare centre owner and operator continue to trade at a below-market relative valuation and above-average dividend yield. Investors may be concerned about the ability of the company to successfully transact new deals given an increase in competition. However, at today's price of around $3.60 per share, analysts expect G8 Education to offer a dividend of 6.6% fully franked, which may compensate for the risk.
WAM Capital Limited
WAM Capital is one of the oldest and most successful listed investment companies (LIC) on the ASX. Led by Geoff Wilson, the company has created an enviable track record of exceptional investment returns. While the fund has grown over time, perhaps limiting its flexibility, it continues to drive strong returns despite holding large amounts of cash. Moreover, the company has established a reputation for big dividends to shareholders. Based on last year's dividend payment, WAM Capital shares yield 6.1%.
Buy, Hold or Sell?
As always, there is more to a successful investment than the dividend yield alone, so investors would be wise to undertake more research before making a decision to invest. If I were forced to choose my favourite company however, it would be WAM Capital. I think the business is exceptionally well-run and offers modest growth potential in addition to dividends.
