Dividend shares can be a great way to earn passive income for investors like me. Although I own plenty of growth shares, I also allocate a portion of my Stocks and Shares ISA to quality dividend-payers. Occasionally, opportunities come along for me to add to this part of my portfolio.
Small-but-mighty dividend shares
I reckon one such opportunity is Jarvis Securities (LSE:JIM). I’ve been watching this stockbroking company for a while and I like what I see. Not only does it offer a 5% dividend yield, but it also offers growing sales and earnings. On average, earnings have grown by 16% per year over the past five years, and they’re forecast to grow by 23% per year over the next five years.
It’s great to find dividend shares with a solid track record. And Jarvis certainly ticks that box — It has regularly been paying dividends for over 15 years.
Jarvis is a relatively small company with a market capitalisation of just over £130m. But in many ways, I’d say that’s a good thing. Smaller companies are often overlooked by larger funds. That creates opportunities for private investors like myself that look to unearth hidden gems.
One thing to bear in mind, however. Jarvis operates in a competitive industry and against some much larger players. It will need to ensure its product and services continue to provide value to new and existing customers.
Flat floors, fat profits
Another ‘super-cheap’ dividend share that I’d buy today is Somero Enterprises (LSE:SOM). I reckon this industrial equipment manufacturer is another relatively unknown hidden gem. It makes specialist laser-guided machines that are used to create perfectly flat concrete floors. It’s the kind of flooring that’s used in warehouses, data centres and other multi-storey buildings.
As with Jarvis, I like that Somero’s sales and profits are growing. It offers a 5% dividend yield and has reliably paid dividends for almost a decade. Quite often I find that dividend shares don’t offer much in the way of growth prospects as they tend to be more mature companies. But I feel Somero has much further to grow. The recent $1.2trn US infrastructure deal could help too.
But I have to note that Somero operates in a cyclical industry. The next recession could lead to a drop in demand for its machines. I’d also look out for copycats that try to imitate its equipment. Although it works hard to protect its patents, it’s something I stay aware of.
Overall, I really like it though. It’s a high-quality, high-margin, generous dividend-payer that looks cheap to me. And I’d certainly consider it for my portfolio.
Both Jarvis and Somero offer an above average dividend yield, easily beating the current FTSE 100 dividend yield of 3.4%. Occasionally, I find top dividend shares like these that also offer ample growth potential. For me, that’s a strong combination.
