When it comes to investing in dividend shares I like to look for shares with a good yield and room for significant growth, rather than a great yield which is likely to remain static or grow slowly.
Take for example Retail Food Group Limited (ASX: RFG). The company behind brands such as Gloria Jean's and Donut King has increased its dividend each year for a decade.
Investors that were lucky enough to snap up shares 10 years ago when its share price was $1.36 received a fully franked yield on cost of 21.7% last year.
This means that for every $10,000 invested in Retail Food Group in 2007, investors received a fully franked $2,170 in dividends. You'll certainly not find returns like that in term deposits or savings accounts.
So with that in mind, here are four shares which I believe could one day become dividend stars:
Appen Ltd (ASX: APX)
Appen provides high-quality language data and services to government agencies, automakers, and major technology companies such as Facebook and Microsoft. I believe the company has an extremely bright future and the potential to grow its dividend significantly over the next decade. At present it yields a fully franked 2% dividend.
SEEK Limited (ASX: SEK)
This fast-growing job listings company's shares currently provide investors with a trailing fully franked 2.8% dividend. Whilst this is by no means a huge yield, I believe it will increase strongly over the next few years thanks largely to the growth of its international operations.
Sigma Pharmaceutical Limited (ASX: SIP)
Sigma is the company behind pharmacy chain brands such as Amcal, Chemist King, and Guardian. At the current share price it provides a trailing fully franked 4.5% dividend. A key driver of growth in the future could come from Amcal's launch online in China. Whilst it is early days, management advised late last year that the launch has exceeded expectations so far.
Vocus Group Ltd (ASX: VOC)
I think this growing telco company could be a real dividend star of the future. At present Vocus provides a trailing fully franked 3.4% dividend. But with its explosive growth prospects and management's plan to grow its dividend in line with the growth of the business, I feel this yield could widen significantly in the future.
