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2 top dividend growth stocks I think ISA investors can’t afford to miss

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Investor demand for Lok’nStore Group (LSE: LOK) shares has shot through the roof as we head into the final stretch of 2019. Since the start of November, the self-storage hero’s gained 20% in value and was just trading at record peaks above 600p per share.

The AIM company lifted off in the wake of some truly stunning results for the fiscal year to September 2019. Strong demand growth for self-storage space in the UK is something that I touch upon with some regularity, but even so, those latest numbers from Lok’nStore, a company which has a history of impressing the market, were pretty exceptional.

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Thanks to a revenues improvement of more than 10%, to £16.95m, adjusted EBITDA leapt 12% to £7.39m, while net asset value per share ballooned to 533p from 480p in FY2018. On top of this, strong cash flows helped it record a cash balance of £13.6m versus £5m last time around, and this encouraged it to lift the full-year dividend in excess of 9% to 12p per share.

It’s not a surprise to see City analysts predicting another year of payout growth in the current period, a 13.1p per share currently being touted. There are bigger yields than Lok’nStore’s reading of 2%. But I’d argue that the rate at which the firm could find itself still lifting payouts in the years ahead, as it expands its store estate to enable more impressive profits progress, still makes it a great pick for income chasers.

Another dividend hero

Before I let you go, I’d like to speak about RWS Holdings (LSE: RWS), a stock from which I’m expecting some strong financials early next month. Full-year numbers (for the period ending September) are scheduled for release on December 10.

This AIM-quoted stock is seeing demand for its translation services take off and in October announced that revenues would likely be up 16% for the full year, at £355m. That’s thanks to a combination of strong organic growth at the core, the positive contributions of its Moravia and Alpha Translations Canada acquisitions and favourable currency movements.

Like Lok’nStore, RWS isn’t famed for the size of its dividends yields. For the current year this sits at 1.6%, better than the returns one can expect from a Cash ISA, though some way short of the 3.3% broader average for the UK’s mid-caps.

Rather, it’s considered a solid income pick owing to the rate at which it’s lifted annual payouts over the past half a decade, including a 15% rise to 7.5p when it reported for fiscal 2018. A hike to 8.6p is predicted by City analysts for the year just passed and another rise to 9.5p for the present period. With profits booming and cash soaring through the roof, RWS is a share I’d buy in expectations of rampant dividend growth for some time to come, and particularly as it likely chases down more M&A targets.

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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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