Owning companies with growing businesses can be a surprising way for dividend investors to earn an attractive income. After all, dividend payout ratios at these companies are typically low, with most of the funds being reinvested for growth.
However, if the business can become many times larger over the course of a decade, investors can find that their dividend payouts grow along with it, even if the company continues reinvesting most of its funds into growth. Here are 3 growing businesses with growing dividends:
Collins Foods Ltd (ASX: CKF)
Like Greencross below, Collins Foods has been expanding via the acquisition of new restaurants, with the company operating KFC, Sizzler, and Snag Stand brands both here and overseas. Sizzler has been a chronic underperformer in Australia, and the company carries a sizeable chunk of debt. Still, management runs their restaurants well and the willingness to invest in new ideas like Snag Stand could uncover some surprising sources of growth in the future.
Collins has grown its dividend from 10.5 cents in 2012 to 16 cents in 2016, and could continue to grow it further as a result of the company's ongoing expansion in both Australia and Europe.
Greencross Limited (ASX: GXL)
With careful expansion and acquisition of new vets and pet retailers, Greencross has become many times larger since it began paying a dividend in 2009. Dividends are up from 5.5 cents per share to 18 cents per share in the past 7 years, and the company is only a fraction of the way towards its stated goal of 20% market share of the pet market.
New products and continued investment in expansion could see today's dividend continue to grow in the future.
Ramsay Health Care Limited (ASX: RHC)
This private hospital operator has been one of the best growth and dividend shares over the past 20 years, with dividends increasing from 7.4 cents in 1998 to 119 cents in 2016. While debt has funded much of the growth, Ramsay has been well managed and the company has taken advantage of opportunities to expand internationally as well. With ongoing growth in demand for healthcare services worldwide, Ramsay could continue to grow earnings and dividends into the future.
