Australia Markets closed

3 ASX small caps with growing dividends

James Mickleboro
ASX dividend shares

Although the likes of Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) offer investors very generous dividends, I don’t expect much by way of growth from them over the medium term.

So if you’re on the lookout for dividends that have strong growth potential I would suggest you check out the three small cap shares listed below. Here’s why I like them:

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is Australia’s leading baby products retailer which became a victim of its own success in FY 2018 when the closure of a large number of competitors led to heightened clearance activities. Pleasingly, these competitors are now long gone and the company is benefiting from the reduced competition. So much so, it posted a 28% increase in net profit after tax to $5.2 million during the first half. This strong form and its positive outlook allowed Baby Bunting to declare a fully franked interim dividend of 3.3 cents per share, up 18% on the same period last year. On an annualised basis this equates to a 3% yield. I expect this dividend to continue growing strongly over the coming years.

Kogan.com Ltd (ASX: KGN)

Whilst this ecommerce company’s shares only provide a trailing fully franked 2.5% dividend yield at present, I believe this dividend could grow significantly in the future if Kogan can continue its strong growth. After a shaky start to the year, Kogan returned to form in the third quarter of FY 2019 when it posted a whopping 96.4% increase in EBITDA compared to the prior corresponding period. And with management confident in its business strategy, I believe Kogan’s earnings and dividend could grow strongly in FY 2020.

Propel Funeral Partners Ltd (ASX: PFP)

Propel Funeral Partners is the second largest funeral business in the Australia and New Zealand region with a network of 109 locations. At present its shares offer a fully franked trailing 3.8% dividend yield. I believe this dividend could grow at a solid rate over the next decade thanks to improving trading conditions and the company’s growth through acquisition strategy.

And here are three more top shares which are growing their dividends at a strong rate.

NEW! Analyst Names 3 Best Dividend Pick for FY 2020

With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.

Hint: These are 3 shares you’ve probably never come across before.

They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”

We think these 3 shares offer solid growth prospects over the next 12 months. The first two currently offer fat, fully franked yields. The last is a surprising REIT offering you the benefits of being a landlord with none of the hassle! You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."

Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!

The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.

Click here to claim your free copy right now!

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Kogan.com ltd and Propel Funeral Partners Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019