While buying high-yielding stocks will help to boost an investor's income return, dividend growth could prove to be more important in 2017. Higher rates of inflation could mean that the market favours those companies that can keep pace with a faster rising price level. As such, these three fast-growing dividend shares could record high share price gains next year.
A stable support services business
The track record of Compass(LSE: CPG) shows that it's a relatively reliable business. In the last five years it has increased its bottom line in every year, with it averaging 9% growth per year. This trend is set to continue, with the company's earnings due to rise by 17% next year. That's more than twice the wider index's growth rate and should boost investor sentiment in the stock.
It also means that a higher dividend is on the cards. Compass is expected to grow its shareholder payout by 9.5% next year, which puts it on a forward yield of 2.6%. While this may seem rather low, the earnings growth potential of the business means that it could become a strong income play over the medium term. When coupled with its reliable performance, Compass could be extremely popular next year and record high capital gains.
A dominant player
The storage industry is highly lucrative and has the potential to grow over the medium term. It's appealing at least partly because it offers a high degree of earnings visibility, since most of its sales are recurring. This provides stability, as well as the opportunity to raise prices without losing large numbers of customers.
Within this space, a dominant player is Big Yellow Group (LSE: BYG). It's expected to record a rise in earnings of 11% this year and 9% next year, which puts it on a favourable valuation. It has a price-to-earnings growth (PEG) ratio of just 1.9, which indicates that there's a wide margin of safety on offer.
In terms of its dividend appeal, Big Yellow is due to increase shareholder payouts by 22% over the next two years. This puts it on a forward yield of 4.6% and with dividends being covered 1.25 times by profit, they should rise at a similar pace to profit over the medium term.
A property opportunity
While the UK property market is experiencing a high degree of uncertainty at the present time, there are opportunities for investors to take advantage. One of them is Tritax Big Box(LSE: BBOX), which focuses on logistics facilities. It's expected to grow its bottom line by 5% this year and 10% next year, which should allow it to raise dividends by 3.6% per annum during the same time period.
This should keep its dividend growth ahead of inflation and mean that its investors enjoy a real-terms rise in their incomes over the next couple of years. Tritax Big Box also trades on a PEG ratio of 1.8, which shows that it offers good value for money. And with a yield of 4.7%, it remains a relatively high yielder within the FTSE 350.
But is this an even better income stock?
Despite this, there's another stock that could be an even better buy. In fact it's been named as A Top Income Share From The Motley Fool.
The company in question could make a real impact on your income prospects in 2017 and beyond. And in time, it could help you retire early, pay off your mortgage, or simply enjoy a more abundant lifestyle.
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Peter Stephens owns shares of Big Yellow Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.