Childcare operator G8 Education Ltd (ASX: GEM) is definitely one of the more generous dividend payers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
Investors that pick up a parcel of its shares today should expect to receive a fully franked 6.5% dividend over the next 12 months, compared to the market average of 4.2% according to CommSec.
With a dividend yield of that magnitude and interest rates at record lows, it isn't hard to see why it has become a favourite of income investors.
Especially as its shares are changing hands at just 14x trailing earnings, well below the market average price-to-earnings ratio of 17x.
In my opinion this makes them a great alternative to the banks which have started to look a little expensive after their recent rally.
In fact, the shares of Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) have just hit new 52-week highs today. At current prices I believe they are fully valued and wouldn't expect to see much by way of gains moving forward.
Whereas it could be a different story for G8 Education. In FY 2016 G8 Education started the year very poorly, but its performance in the second half was reassuringly positive.
If this momentum can be carried through to FY 2017 then I believe there is room for G8 Education's share price to make significant gains this year.
The combination of potential share price gains and its generous fully franked dividend make G8 Education a buy in my opinion.
