I think the small end of the market is a great place to look for dividends with the potential to grow meaningfully in the future.
Three small cap shares that I think are worth looking closely at this week are listed below. Here's why I like them:
Adairs Ltd (ASX: ADH)
I think this home furnishings retailer's shares offer a great mix of value, growth, and income right now. Adairs had a very successful FY 2018 and delivered a 45.4% increase in profit to $30.6 million thanks to its successful focus on large homemaker stores and strong online sales growth. Pleasingly, the strong form looks set to continue in FY 2019 following its positive start to the year. On Friday management advised that same store sales were up 5.2% during the first 13 weeks of FY 2019. If it can maintain this strong performance for the remainder of the financial year, then I believe profits and its dividend could grow at a decent rate. At present Adairs' shares offer a trailing 6% dividend.
Paragon Care Ltd (ASX: PGC)
I think that this integrated services provider to both the healthcare and aged care markets would be a good option for small cap investors. As well as having significant opportunities to grow through acquisitions following its $45.2 million placement of shares with China Pioneer, I believe its recent expansion into New Zealand has given it a long runway for growth. Paragon Care's shares currently offer a trailing fully franked 4.5% yield.
Wellcom Group Limited (ASX: WLL)
Wellcom is a production and content management company that I think could be worth a closer look. In FY 2018 Wellcom grew revenue by 9% to $108 million and net profit after tax by 10% to $11.7 million. The solid performance was driven partly by a number of new contracts wins. Based on its normalised dividend of 21 cents per share (which excludes its special dividend), Wellcom's shares currently offer a trailing fully franked 4.2% yield.
