ASX Growers

There’s a saying that “profits are a matter of opinion, but dividends are a matter of fact”.

It’s undeniable that consistently dividend paying stocks are a reliable hedge against inflation and, on average, they tend to be less volatile than non-dividend-paying stocks.

But, as Bell Direct’s market analyst, Grady Wulff, told Stockhead recently, it’s “really important not to get fooled by companies that are paying a higher dividend in one year, but then no dividends at all the next.”

That’s also why Wilson Advisory’s Rob Crookston looks for dividend-paying companies that can deliver growth year over year, continuously compounding his cash flows each year.

“We think selecting a dividend strategy by its initial dividend yield is a poor choice because the growth of the dividend over time ultimately determines the income payouts in future years,” he said.

With that in mind, Eddy set out to list ASX small caps which have the highest dividend growth (not dividend yield) over a 5-year and 10-year period.

Top of Eddy’s hit list – HiTech Group Australia (ASX:HIT). Its core business is recruitment of ICT professionals and supply of contracting services to the public and private sectors.

HiTech has been capitalising on strong demand for ICT talent and services as organisations build new digital services and integrate them with legacy systems.

FY22 saw another record result with operating revenue of $63m (an increase of 49.6%) making it the eighth consecutive year of double-digit revenue growth.

In the first half of FY23, HIT’s revenue increased by a further 37% on pcp and EBITDA increased by 10% on pcp.

Dividend growth rate: 1yr – 5%; 5yr – 13%; 10yr – 41%

Lottery software platform Jumbo Interactive (ASX:JIN) provides lottery management expertise to the government and charity lottery sectors in Australia and globally.

Jumbo’s performance “has been constrained by a poor run of Powerball and Oz Lotto jackpots”, but investors have overlooked the company’s success in increasing its per-ticket commissions.

For FY23, the company expects its underlying EBITDA margin to be at the upper end of the original range of 48% to 50%.

Dividend growth rate: 1yr – 16%; 5yr – 13%; 10yr – 34%

Then there’s fund manager Australian Ethical Investment (ASX:AEF), which specialises in environmental and socially responsible investments.

In the latest update, AEF said its funds under management (FUM) rose 48% year on year.

Recently, the fundie has been turning its focus to extracting further middle and back office synergies, initially through the transition of superannuation administration services to a single provider.

Dividend growth rate: 1yr – -25%; 5yr – 18%; 10yr – 24%

Nick Scali (ASX:NCK) sells retail household furniture and associated accessories across Australia and New Zealand.

While we’ve all seen its retail stores, Nick’s online platform is also starting to gain popularity, with online sales soaring during the pandemic.

Separately, the company has plans to expand its ANZ footprint by opening dozens of new showrooms across both markets over the coming years.

In the last half, Nick’s sales revenue was $283.9m, up 57.4% on pcp.

Dividend growth rate: 1yr – 8%; 5yr – 16%; 10yr – 22%
 

Canaccord Genuity

Broker Canaccord Genuity has initiated a Buy recommendation on road safety tech company Acusensus (ASX:ACE), with a price target of $5.40 (vs current price of $3.17).

Acusensus provides a broad range of technologies to combat the growing problem of distracted driving. Its AI-enabled road safety solution provides a patented first-mover advantage in what it considers to be an immediate $1.8b market opportunity.

The flagship is the Heads-Up product, which was designed to detect illegal use of mobile phones while driving.

The product suite has since evolved into a comprehensive, multi-solution offering which supports speed (average and point), seatbelt non-compliance, and licence plate-based detection and enforcement.

“ACE represents one of the fastest-growing small cap stocks over the previous three years,” said the broker.

Canaccord has identified five core growth drivers for ACE including geographic expansion with pilot programs in 10 countries, as well as product expansion into other verticals such as railway crossing monitoring, drugs or alcohol, and road worker safety monitoring.
 

Sequoia


Sequoia has initiated a coverage on Duxton Farms (ASX:DBF) and slapped a share price target of $1.49 (vs current price of $1.32).

Duxton Farms is the only publicly listed farming company in Australia that cultivates both crops and livestock. On average, since their IPO, crops have made up approximately 85% of all revenue and livestock roughly 15%.

Sequoia believes that global demographics point to a big tailwind for the company.

The world population is expected to grow from 8 billion in 2022 to 9.7 billion in 2050, whilst global GDP and per capita income are expected to grow over the next decade.

Another key driver for Duxton Farms includes purchasing and developing land.

The company’s core aggregation is in NSW but has recently expanded into Northern Territory and Victoria, with further plans to expand elsewhere.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

Read MoreSmall Caps

Featured Companies

You might be interested in