Forget a Cash ISA! I’d prefer to get rich with these 5%+ dividend yields

Ignore those Cash ISAs and their awful interest rates. Royston Wild believes these dividend heroes are all you need to make a fortune from your surplus cash.

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Are you content to park your savings in a low-maintenance Cash ISA and forget about it? If the answer’s ‘yes’, you could be costing yourself a fortune.

Even with UK inflation rumbling at three-year lows of 1.7%, even those invested in the best-paying instant-access cash product in the market (Skipton Building Society’s latest E-saver product with a rate of 1.3%) are seeing the value of their money crumble in real terms. Clearly, those seeking to make handsome little nest egg need to find better ways to make their money work for them.

Bowled over

You’d be much better off using your money — bar capital needed for a rainy day, or some spare, everyday cash — to buy shares in Ten Entertainment Group (LSE: TEG), I believe.

This particular share offers a whopping, inflation-mashing 5.1% forward dividend yield for 2019, and a 5.9% one for next year too. The potential for abundant income flows now (and in the future) isn’t the only reason to pile into the business — with Britons flocking to ten-pin bowling alleys in their droves, Ten Entertainment is a terrific pick for growth investors as well.

Latest financials showed like-for-like sales growth improved to 7.4% in the first six months of 2019, from 3.1% a year earlier, a result which helped push group revenues and profits to record levels. No wonder the leisure giant continues to splash the cash on acquisitions (it’s bought another two sites so far this year) and to refurbish its estate.

Reflecting these numbers, City analysts are predicting mammoth earnings growth of 25% and 18% in 2019 and 2020, respectively, figures which, incidentally, leave Ten Entertainment trading on a low prospective P/E ratio of 11.6 times. Given the breakneck rate at which sales are growing, this sort of value makes it a steal.

Even bigger yields!

I reckon Residential Secure Income (LSE: RESI) is also another better destination for your surplus funds than a Cash ISA.

Sure, it might not be as cheap as Ten Entertainment — at current prices it actually carries a high forward P/E ratio of 29.5 times. However, I’d argue that the small-cap’s exceptional long-term profits outlook merits such a hefty premium. Besides, chunky dividend yields of 5.5% for the year to September, and 5.7% for fiscal 2020, take the sting out of this high reading.

Residential Secure Income is a major player in the realm of social housing, a sector which is attracting vast amounts of government spending. Last year, Whitehall pledged to release an extra £2bn for housing associations over the next decade. But so colossal is the homes shortage in this area that even-greater sums are likely to be needed further out.

What’s more, the company is stocking up on acquisitions like there’s no tomorrow. In the first half of this fiscal year alone it paid £83m to buy another 332 residential units, taking the total paid on M&A since its IPO in mid-2017 to a staggering £302m. And the business has plenty of financial firepower to continue on this ambitious growth strategy, thus delivering some titanic shareholder rewards in the years ahead.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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