3 dividend champions to help your portfolio grow in 2017

These three dividend champions all yield more than 5% and the payout is well covered.

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DFS sofa

Image: DFS: Fair use

With 2017 rapidly approaching, it’s time to begin thinking about your investment strategy for the next year. 

Unfortunately, 2017 promises to be yet another year of economic and political turbulence, but the one thing investors can rely on is dividends. With this in mind, here are three dividend champions to help supercharge your dividend income in 2017.

Slow and steady

Shares in Communisis (LSE: CMS) have struggled during 2016 as the company’s earnings have disappointed. Still, while management has struggled to grow earnings the group’s dividend remains in place. 

At present, the shares support a dividend yield of 5.9% and the payout is covered 3.2 times by earnings per share. With such a high payout cover there’s plenty of room for further payout growth and the company isn’t jeopardising its future growth prospects by returning all available income to investors. After payment of the dividend, there’s money left over for reinvesting in the business. City analysts have pencilled-in earnings per share growth of 13% for the company this year and 6.6% for 2017. The shares currently trade at a forward P/E of 6.9. 

Take a seat

DFS Furniture (LSE: DFS) may not be the first company that comes to mind when dividend stocks are mentioned but the sofa retailer’s 6.1% dividend yield is trying to change that. 

DFS is almost the perfect dividend stock. The company is highly cash generative and requires little in the way of capital spending to run its stores. For 2016 the firm reported revenues of £756m and a net profit of £60.3m on equity of £250m, giving a highly impressive return on shareholder equity of 24%.  

That said, DFS isn’t perfect. The company has £140m of debt but management is working to reduce this burden. Debt fell by 13% during the company’s 2016 financial year and a similar decrease is expected this year. 

City analysts are expecting DFS to report earnings per share of 23.4p for its 2017 fiscal year and to pay out 13.2p per share to investors for a dividend cover of 1.8 times. 

Property problems 

Since the Brexit vote, investors have been wary of the UK’s real estate sector and shares in real estate investment trusts such as Capital & Regional (LSE: CAL) have suffered. However, for the long-term investor, these declines have opened up some great opportunities. For example, after falling by around 20% year-to-date, shares in Capital & Regional now support a dividend yield of 6.3% and the payout is covered twice by earnings per share. Also, the shares currently trade at a deep discount to net asset value. At the end of June Capital’s reported net asset value per share was 71p, 34% above the current price. 

The reassuring thing about investing in Capital & Regional is that management owns a significant chunk of the company, and as a result has a strong motivation to achieve the best results for investors. Non-executive director Louis Norval owns approximately 25% of Capital’s shares.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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