Income is a very important part of returns for a lot of people. Dividends are generally less volatile than share price movements and can represent some, if not all, of a person's income in retirement.
If I were to invest in dividend shares I'd want to go for businesses that have reliable dividend histories and have every chance of growing at a good rate over the coming years.
But, the potential dividend ideas also have to pay a good yield, or else I may as well keep cash in the bank.
Here are three ideas:
WAM Research Limited (ASX: WAX)
WAM Research is my favourite listed investment company (LIC) run by Wilson Asset Management. It purely looks at the quality of the underlying business rather than trying to find any value arbitrage like some of the other WAM LICs.
Over the past five years WAM Research's portfolio has returned an average of 17.4% per annum, before fees. The LIC turns this market-beating performance into a growing stream of fully franked dividends for shareholders.
It has increased its dividend every year since the GFC and it currently has a grossed-up dividend yield of 8.87%.
Tassal Group Limited (ASX: TGR)
Tassal is Australia's largest fish business with large salmon farms in Tasmania's waters and a wholesale fish business as well.
Thankfully, Australian diets are steadily improving, which includes eating more salmon. Tassal is steadily selling more fish each year which is leading to growing operating earnings.
The bonus for income investors is that growing profits results in growing dividends. Tassal trades with a low price/earnings ratio, which helps boost the grossed-up dividend yield to 5.7%.
Arena is one of the larger real estate investment trusts (REITs) on the ASX. It aims to invest in properties in growing industries. This has resulted in it owning a lot of childcare buildings and a few medical buildings.
I like Arena because it has a long weighted average lease expiry (WALE), a growing earnings profile and a forward-thinking strategy.
It has grown steadily over the past five years and now has a trailing distribution yield of 5.84%.
Foolish takeaway
For investors looking purely for quality dividends my choice would have to be WAM Research. Even though it is trading on a significant premium to NTA it has the biggest dividend by far and is steadily increasing it.
