Forget Commonwealth Bank of Australia (ASX: CBA) shares, take a look at Integrated Research Limited (ASX: IRI) shares, RCG Corporation Limited (ASX: RCG) shares and Monash IVF Group Ltd (ASX: MVF) shares for dividends.
Indeed, if you want to escape the 'usual suspects' like CBA and Telstra Corporation Ltd (ASX: TLS), but still want to collect some bi-annual dividends, these three small caps should be on your watchlist.
Integrated Research
Integrated Research is a $470 million software business specialising in computer diagnostics and security. The company's share price has risen at impressive rates over the past five years as profits steadily rose. Pleasingly, the company has paid out a rising stream of dividends. It is forecast to pay a 2.3% partially franked dividend in the year ahead.
RCG Corporation
RCG is perhaps a little too big to be called a 'small cap' in Australia, but given that it has grown rapidly over the past few years I still consider it a small company, especially compared to the likes of Telstra and CBA. RCG is the owner of footwear stores like The Athlete's Foot, Hype DC and much more. It is also the exclusive distributor of footwear brands like Saucony, Timberland, Sketches and Merrell.
The company has grown quickly by acquiring other businesses, but there are now fears that its growth will slow. With shares having fallen recently, the company's shares trade on a fully franked dividend yield of 5.2%.
Monash IVF
Shares in the birthing specialist Monash IVF have also come under selling pressure as conditions in the industry moderated. Over time, however, IVF is growing in popularity as parents become older. Shares in the company currently appear quite cheap, with analysts tipping modest growth in coming years. What's more, at these levels, Monash IVF shares trade on a trailing dividend yield of 4.4% fully franked.
Foolish Takeaway
Historically, blue chip shares like Commbank and Telstra have provided an excellent source of tax-effective dividend income. As a result, many portfolios are overexposed to these large blue chip shares. Therefore, considering companies further down the market may be worthwhile for both growth potential and risk reduction.
Although these three smaller companies pay hefty dividends, you must expect volatility if you decide to buy small caps. So, don't invest more than you can afford to lose.
