With interest rates forecast to stay low for an extended period after benign consumer price inflation data today, many investors will be looking for stocks to pay reliable income streams to beat those available from term deposits.
Conservative investors should look to minimise the risk of capital losses, and that's why it's advisable to look for big businesses with reliable profit streams. Here are a few to consider.
Sydney Airport Holdings Ltd (ASX: SYD) is a monopoly that can charge virtually whatever it wants for the use of its services. With passenger numbers and travel growth generally on a steady upward trajectory it's a solid investment. Selling for $4.11 the trailing yield is 5.47%.
As an alternative consider Australasia's second-busiest international airport, Auckland International Airport Ltd (ASX: AIA), it also has ownership interests in Queensland's tourism leveraged Cairns and Mackay airports, alongside another tourist hotspot in Queenstown airport in New Zealand's south. Auckland Airport itself is nicely leveraged to the boom in Chinese travel. The trailing yield is 2.71% based on a price of $3.72.
Shares in shopping-centre giant Westfield Retail Trust (ASX: WRT) are currently trading on a trailing yield of 6.24%, with the dividend expected to rise in the 2014 financial year. As an alternative for global exposure consider Westfield Group (ASX: WDC), it has great prospects and trades on a trailing yield of 4.8% based on current prices.
Insurance giants have a higher level of risk than real estate investment trusts, but also have potential for some term-deposit thrashing payouts and market-beating returns. Two of the biggest and best are QBE Insurance Group Ltd (ASX: QBE) and Suncorp Group Ltd (ASX: QBE), with both paying attractive trailing yields of around 2.7% and 5.76% respectively. The pick of the bunch looks to be Insurance Australia Group Limited (ASX: IAG) with a bumper fully franked yield around 6.2% based on analyst forecasts for payouts in the 2014 and 2015 financial years.
Payouts with insurers can be notoriously lumpy though, as profits are hard to predict with natural disasters affecting underwriting profits and big credit spreads impacting returns on investments.
Foolish takeaway
Both the Westfield businesses pay reliable dividends and look to have potential for steady capital gains over a medium-term time horizon. The airports have the advantages of being monopoly-like businesses and look unlikely to take a bath anytime soon. Any investment should always be a small part of a balanced portfolio however, as airports for example are subject to the risks of an act of terror or global health epidemic.
