Dividends are quite underrated in the investing world. They form a big part of investment returns and play a key role in compounding returns over the long-term.
Focusing on dividends doesn't have to mean buying slow-growth companies. I view some of the top dividend shares as ones that are increasing the dividend at a fast rate year after year.
Here are ten of my favourite dividend shares to buy today and hold for the next five years:
Altium Limited (ASX: ALU)
Altium is predicting large revenue growth over the next decade. It makes electronic PCB software which helps a number of organisations from NASA to John Deere design the machines of the future.
Altium is trading at 24x FY18's estimated earnings with an unfranked dividend yield of 2.42%.
Australian United Investment Company Ltd (ASX: AUI)
Australian United Investment is a listed investment company (LIC) that has been running since the 1950s. It invests in mostly large blue chips but it pleasingly has a bigger dividend than most of the other large-cap focused LICs.
It has maintained or grown its dividend every year since 1992. It currently has a grossed-up dividend yield of 5.89%.
Clime Capital Limited (ASX: CAM)
Clime is quite small compared to most LICs, however it's quite unique in the ASX as it is willing to invest in Australian large-caps, mid-caps, small-caps and overseas shares. Most other LICs usually only focus on one area.
This hybrid approach could be the best to take as it gives the investment team the ability to invest wherever it thinks is the best opportunity.
Clime has maintained or grown its dividend every year since 2012 and currently has a grossed-up dividend yield of 7.93%.
InvoCare Limited (ASX: IVC)
InvoCare is Australia's largest funeral and cemetery operator with a market share of around 33%.
The death rate is expected to keep increasing for many years. This could be a huge boost to InvoCare's profit and dividends. It could make InvoCare the best defensive business to own on the ASX.
It's currently trading at 28x FY17's estimated earnings with a grossed-up dividend yield of 4.06%.
Rural Funds Group (ASX: RFF)
Rural Funds Group is the best real estate investment trust on the ASX in my opinion.
It has a wide variety of farm types in its portfolio with solid rental indexations built into its contracts. Farmland has been a useful asset for hundreds of years and I expect it will continue to be for a long time to come.
Rural Funds Group is trading with a trailing distribution yield of 5.16% and management have pencilled in a 4% increase to the FY18 distribution.
Ramsay Health Care Limited (ASX: RHC)
Ramsay is one of the biggest private hospital operators in the world. The ageing tailwinds of all the countries that it operates in make it a great defensive, growing business.
It has increased its dividend every year since 2000 and I think it has many more years of capital and dividend growth to come.
It's currently trading at 27x FY17's estimated earnings with a grossed-up dividend yield of 2.54%.
Washington H. Soul Pattinson and Co. Ltd. (ASX: SOL)
This company is more commonly known as 'Soul Patts'. It's an investment conglomerate that owns large stakes in companies like TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API).
Soul Patts has increased its ordinary dividend every year since 2000. It's currently trading at 16x FY17's estimated earnings with a grossed-up dividend yield of 4.34%.
WAM Capital Limited (ASX: WAM)
WAM Capital is the flagship LIC run by Geoff Wilson and his investment team. It has a great track record of beating the market over the long-term by investing in undervalued growth companies. It pays out a lot of the profit it makes as a growing, fully franked dividend.
It's currently trading with a grossed-up dividend yield of 9.16%.
WAM Research Limited (ASX: WAX)
WAM Research is another LIC run by Geoff Wilson and his high-performing team. It has an even better long-term record than WAM Capital does and focuses more on the long-term opportunity of the businesses it invests in.
It's currently trading with a grossed-up dividend yield of 8.77%.
Whitefield Limited (ASX: WHF)
Whitefield is a LIC that has been going since 1923 and focuses on the large blue chips of Australia. There are a number of LICs that focus on large caps, but Whitefield has been the best performing out of all of them. Over the last five years it has returned an average of 15.3% per year.
It's currently trading with a grossed-up dividend yield of 5.45%.
Foolish takeaway
So, there are some of my favourite dividend ideas on the ASX at the moment. If you were to buy an equal parcel of each of the above then it would result in a grossed-up yield of 5.57%, which would be a good yield, whilst offering stability and growth.
If you don't like the idea of focusing on dividend shares, then perhaps these growth stocks would be far more to your liking.
