With the dollar hovering around 91 cents, the mining sector still struggling, consumer confidence really low and housing market only showing modest growth, the RBA may look to make another cash rate cut come August.
If the RBA does decide to cut the official cash rate fluctuations in high yielding stocks and those that are currently in the doldrums will start to see a flow on effect in their balance sheets and stock prices. Short term, banks and other high yielding companies may fluctuate higher as investors go in search of 'safe' stocks to put their money with.
National Australia Bank (ASX: NAB), Westpac (ASX: WBC) and Telstra (ASX: TLS) currently offer dividends of 6.1%, 5.9% and 5.8% respectively, which will be enticing to those searching for yield. However, there are better and more moderately valued stocks on the market that appeal to investors in terms of yield, growth and value.
The retail space has taken a beating in recent months (years) and as such, most stocks are trading at a premium. Currently, three stocks that present good value and yield are Myer (ASX: MYR), Harvey Norman (ASX: HVN) and Metcash (ASX: MTS).
Ask a different investor and you'll probably get three different answers as whether they have a future or not. However, there are good reasons to buy them. All sit in an industry that is tightly competitive and have battled with cheaper alternative products like clothing, food products and appliances — but perhaps what's most important is that they are still here.
Metcash and Myer offer 7.9% and 7.7% dividends, whilst Harvey Norman will pay 3.4%, but all offer solid medium- to long-term prospects. Each has strong management and has been through very rough conditions which have made it more efficient.
Foolish takeaway
Investors should be rewarded when they devote their hard-earned cash to Mr Market but we also shouldn't get caught in value traps, chasing yield and low P/E ratios. Myer, Harvey Norman, Metcash, Telstra and the banks have their weaknesses and things could change in an instant but they also have promising upsides in the medium to long term and pay solid dividends to mitigate potential losses.
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Motley Fool contributor Owen Raszkiewicz owns shares in Myer and Metcash.
