High-yielding companies have outperformed the wider market during 2013, but the recent market pullback has pushed yields back over 6% for a number of stocks. The ASX 200 has fallen over 7% since hitting a 5-year high in late October. Prior to that, some high dividend paying stocks such as the big four banks, real estate investment trusts (REITs) and insurance companies had produced exceptional returns around 30% for the year.
The iShares ASX High Dividend Exchange Traded Fund (ETF) (ASX: IHD) was outperforming the ASX 200 (ASX: XJO) by over 6% in October, and was up over 20% for the year. Since hitting that high, dividend stocks have been hit particularly hard. The banks and ETF above are down around 10% from their high.
A number of analysts have questioned whether the banks and other large-cap dividend stocks will quickly return to their highs, or perhaps whether a strategy targeting companies with better growth prospects and paying big dividends could be the way to go in 2014. The following companies have had pretty good years, boast healthy dividends and have solid outlooks for 2014.
Chandler Macleod Group (ASX: CMG) Price: $0.46 Yield: 6.6%
Small-cap human resources and outsourcing company Chandler Macleod Group is up 3% for the year and boasts a forecast forward dividend yield of 6.6%. The share price is essentially at the same place as at the start of 2011, despite earnings per share increasing from 2.8 cents to a forecast 5.1 cents in 2014. A number of analysts have a 'buy' rating on the company at the current price.
Myer (ASX: MYR) Price: $2.65 Yield: 6.52%
Retailer Myer is up 21% for 2013 as retailers have recovered strongly after being sold off heavily in 2012. While consumer confidence is yet to recover fully, Myer is poised to benefit from a recovery in consumer spending in 2014 and recent rationalisation of product lines should result in better margins. Earnings per share are expected to grow by 10% between now and 2015.
SP AusNet (ASX: SPN) Price: $1.14 Yield: 7.5%
Regulated utility provider SP AusNet owns a number of assets in Victoria. Including, the main high-voltage electricity transmission network, an electricity distribution network and a gas distribution network. Because they are regulated, earnings and dividends are highly predictable. Analysts expect earnings per share to increase from 7.4 cents this year to 8.1 cents next year and for the dividend to increase from 8.2 to 8.4 cents, putting the company on a forward yield around 7.5%.
LogiCamms Ltd (ASX: LCM) Price: $1.29 Yield: 8.1%
Engineering contractor Logicamms is up 27% for the year and represents the highest risk of the four stocks. With a tiny market cap of $92 million and after having retreated from a 75% yearly gain in October, the company is now yielding around 8.1%. In a recent announcement the company predicted earnings growth this year, primarily due to a recent acquisition. So far the company appears to have steered clear of the operational problems being faced by rivals and should outperform once confidence in the sector improves.
Foolish takeaway
Dividend stocks had a great run in 2013 and 2014 could be another good year. Though the focus may shift to companies that can combine dividends with growth. The four stocks above yield over 6% and are forecast to deliver earnings growth. They may well outperform next year.
