Hindsight is a great thing. Now that 2013 is behind us we can look back and see what worked and what didn't.
Two themes going out across the Australian finance sector were historically low interest rates and an aging baby boomer population. The two trends are equally significant because they drove a demand for high-yielding dividend stocks like the big banks and retailers.
In 2014 those two themes will still be evident but investors will shift their focus to growth ideas as well. Five stocks I've identified which will benefit from both cyclical and long-term trends in 2014 are listed below.
ANZ (ASX: ANZ) is the only big bank which I believe is currently trading at a moderate price, especially given its growth potential. Although it will have to meet tougher capital buffers in the near future, I believe its Asian strategy and organic growth here in Australia and New Zealand will provide the earnings to increase its dividend.
James Hardie Industries (ASX: JHX) is a construction materials supplier directly linked to the recovering US housing sector. Although its dividend may fall slightly in 2014, long-term earnings-per-share and dividends are expected to increase. Although it's currently trading on high earnings multiples, it looks to be a good growth story this year and beyond.
Collection House (ASX: CLH) is a debt collector and financier with a fantastic track record for growth and pays a great dividend. Currently it yields 4.1% fully franked and boasts a return on equity of nearly 13%. Due to the nature of its business, Collection House could almost be considered a recession proof company.
Companies which can secure long-term contracts and have natural monopolies are almost always reliable dividend ideas. Transurban Group (ASX: TCL) operates toll roads in Australia and the US. Morningstar's analyst earnings consensus is pointing to a much stronger 2014, with dividends to match. Currently it yields 4.8% with partial franking.
Lastly Collins Foods (ASX: CKF) is in the ideal position to benefit from both short and long-term economic tailwinds. It operates and manages KFC and Sizzler restaurants in Australia and Asia and will benefit from both rising confidence and demand for yield – currently it pays a 5.1% return with full franking.
