For long-term shareholders, dividends have proven to be an important part of investment performance, especially when reinvested. One attractive trait of companies with growing dividends is that the dividend becomes an increasing return on your purchase price over time.
For example, a 5% dividend yield at the time you buy could become a 10%, 15%, or 50% yield in time, if the company can grow enough and you hold it long enough. For that reason, even companies with small dividends can be attractive. Here are 3 that are growing their dividends right now:
Greencross Limited (ASX: GXL)
Greencross has rapidly grown its dividend payments over the past 8 years, from 2 cents per share in 2009 to 18.5 cents currently. While its dividends are not expected to grow quite so rapidly over the next 8 years, the company is still in its growth phase and should be able to grow its dividends as its expansion continues.
The company has a variety of initiatives in place to maintain its growth, such as rolling out in-store vets and growing the sales of own-label products, which makes it easy for investors to track the company's progress on growth.
Class Ltd (ASX: CL1)
This self-managed super fund (SMSF) software provider has grown dividends at a rapid clip over the last 2 years, adjusted for splits, and pays distributions quarterly. The most recent market update showed continued growth in Class' software sales, with market share climbing to 22.4%. Continued growth in the SMSF market combined with changes to regulation are expected to drive higher sales for Class over time, while its much smaller Class Portfolio product is also posting respectable growth.
If Class can continue to take market share from incumbents, it could grow its dividends well into the future.
Retail Food Group Limited (ASX: RFG)
Retail Food Group owns a variety of Australia's best-known food franchises, including Brumby's, Donut King, Michel's Patisserie, Gloria Jeans, and more. It has been acquiring coffee roasting and bakery facilities to 'vertically integrate' its franchises, while also expanding its franchises internationally.
The company has grown its dividend payments from 3.1 cents per share in 2007 to 27.5 cents per share in 2016. This is partly due to an increase in the payout ratio (the company pays out a higher % of profit than it used to) but is largely due to growth over the past decade. With continued expansion, RFG is poised to grow its dividend further in coming years.
