Receiving dividends is one of the most enjoyable things about owning shares, it's a result of the businesses you own making profits and rewarding shareholders.
Dividends provide a guaranteed return on your shares, taking some of the guesswork out of trying to sell yur shares for more than you bought them for to be able to make a profit.
When you consider that the share market has returned a long term average of around 10% a year, it could be quite possible to receive most of that return with dividends. The key to that approach is to pick companies that are maintaining or growing the dividend, such as:
G8 Education Ltd (ASX: GEM)
G8 Education is Australia's largest listed childcare centre group with a market capitalisation of $1.4 billion.
It rapidly expanded its network by acquiring centres using debt and this approach put off a lot of investors. It has since slowed down its acquisitive streak which should be seen as a positive.
G8 has committed to paying 6c per share every quarter since December 2014 and is expected to do so until the end of FY17. This means it currently has a grossed up dividend yield of 9.37% and is trading at 14x FY17's estimated earnings.
WAM Research Limited (ASX: WAX)
WAM Research is one of the listed investment companies (LICs) run by Geoff Wilson and his team. It has been one of the best performing LICs over the last 12 months having grown its portfolio by 21.9%.
It's in a strong position right now because at the end of November 2016, 40.6% of its portfolio was in cash. Having a lot of cash protects the portfolio from share market declines and also provides ammunition to buy shares at bargain prices.
WAM Research has grown its dividend every year since the GFC and currently has a grossed up dividend yield of 7.83%.
Westpac Banking Corp (ASX: WBC)
When looking for generous dividend payers on the ASX it's hard to leave out the big four banks.
Out of the four, I think Westpac has the best chance of maintaining and growing its dividend thanks to its diverse array of brands such as Rams, Bank of Melbourne and St. George Bank.
Westpac mostly seems to avoid the bad behaviour that other banks have been punished for, for example it was Commonwealth Bank of Australia (ASX: CBA) that was punished in the financial planning scandal. Avoiding fines could be the difference between growing the dividend or not.
Westpac is celebrating its 200 year anniversary this year by offering a bank account to children born in 2017 and giving it a $200 starting amount (the initial $200 can't be accessed until the child's 16th birthday). This is a great way of attracting the next generation of Australians to the bank.
Westpac is trading at 13.7x FY17's estimated earnings with a grossed up dividend yield of 8.09%.
Foolish takeaway
All three of the above shares could provide most of the desired 10% return with just the dividend. Of the three my order of preference would be WAM Research, Westpac and G8 Education.
If the above dividend stocks aren't enough, you should check out our number one dividend pick for 2017.
