One of Australia's favourite dividend-payers, Insurance Australia Group Ltd (ASX: IAG), might have seen its shares run up too far. It's now offering just a 3.8% dividend, a minimal yield for those either looking to fund a retirement or earn additional cash for reinvestment.
Here are 3 companies that pay much higher dividends:
Retail Food Group Limited (ASX: RFG) – yields 6.1% fully franked
Retail Foods is the franchisor that owns Donut King, Gloria Jeans, Michel's Patisserie, Crust Pizza, and many more popular brands. Its primary business is selling franchises and, increasingly, selling food products (pastries and coffee) to its franchisees.
Although the company has come under fire from short-sellers, it generates plenty of cash and has a number of growth opportunities.
BWP Trust (ASX: BWP) – yields 6% unfranked
BWP owns Australian commercial properties, most of them leased to Wesfarmers Ltd (ASX: WES) subsidiary Bunnings Warehouse. With a long lease life, a financially secure tenant, and sort-of specialised properties (imagine the difficulty in transplanting a Bunnings warehouse to a new location), BWP Trust has a good chance at retaining its tenants for the long term.
As a result, BWP Trust is a promising prospect for the dividend-seeking investor, although the company's relationship with Bunnings is a key risk.
G8 Education Ltd (ASX: GEM) – yields 6.3% fully franked
G8 Education owns and operates a few hundred childcare centres across the country. It pays a large, quarterly dividend and continues to expand via acquiring new centres. However, the company's recent results indicated that the company was suffering competitive pressure and its occupancy levels had fallen. At the same time, G8 continues to expand via selling new shares and recently had to offload 30 million shares at a discount after a significant Chinese investor pulled out of the purchase.
I'm uncomfortable with G8's continued focus on expanding at the same time that its occupancy is falling and competition is increasing, and as a result I am avoiding it, despite the attractive dividend.
