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2 high-growth dividend stocks you might regret not buying

After failing to merge with larger peer ZPG plc last month, GoCompare.com (LSE: GOCO) is on a mission to find growth. 

And as part of this mission, today the firm announced that it has decided to acquire UK online voucher code website Global Voucher Group Ltd, trading as MyVoucherCodes.co.uk and its subsidiaries for £36.5m in cash.

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According to today’s press release on the matter, GoCompare is buying MyVoucherCodes with a combination of existing cash resources and the extension of existing credit facilities. The deal is expected to be to be completed in January and be earnings accretive in 2018 on an underlying basis. 

It is an exciting buy for GoCompare, as it takes the company out of its price comparison home market. Management believes that the deal makes sense as it will increase the opportunities to grow both brands cost-effectively and sustainably. Apparently, the enlarged group will generate 100m views annually on its sites, a vast audience to which management can flog products. 

Dividend Growth ahead

Even though GoCompare has only been a public company for 13 months, the firm has made a splash. After reporting earnings growth of 24% last year, this year analysts are projecting an increase of 11% followed by growth of 18% next year. Today the group confirmed that adjusted operating profit for 2017 is expected to be at the upper end of market expectations.

So it looks as if the company is on track to meet these growth numbers and this should be great news for income investors. 

GoCompare’s management has declared that the company will target a dividend payout ratio of 20% to 40% of earnings per share. For 2017, City analysts are predicting a total distribution of 1.6p per share, rising to 2p next year — payout ratios of around 25% based on current earnings forecasts.

If management decides to pay out 40% of 2018 earnings, the dividend could hit 3p per share, giving a yield of 2.9% at current prices. Put simply, this is undoubtedly one dividend stock worth keeping an eye on. 

Excess cash 

Alongside GoCompare, insurer Esure (LSE: ESUR) does not look like a dividend growth champion, but it is compared to the rest of the market. 

Since its IPO in 2013, it has paid out 55p per share in regular and special dividends, which is equal to around 18% of its IPO price. Analysts have pencilled in a dividend payout of 12.3p for 2017, giving a dividend cover ratio of 65% and dividend yield of 4.8%

Its interim results showed that at the end of the first half, the company had a solvency coverage ratio of 153%, indicating that the firm’s balance sheet is strong enough to support further generous payouts and earnings are growing strongly. For the nine months ended 30 September, the group reported a record quarter of premiums at £233m, up 25% year-on-year. 

This growth should underpin further special dividends and regular payout rises from the group. City analysts are forecasting earnings per share of 18.7p for the full year, giving a forward P/E of 13.5. For 2018, earnings are projected to expand by 13%, and analysts are calling for an 11% dividend increase. So, for 2018 the shares are set to yield 5.4% excluding any special payouts. 

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And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

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Rupert Hargreaves owns no share 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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