The answer may surprise you, it certainly surprised me.
It's one of Australia's most well-known businesses with an annualised fully franked dividend of 17 cents, and a yield of 7.2%. Grossed up to include the franking credits, that's a pre-tax return of 10.3%.
If the company can continue to pay out that rate of dividends, into the future, shareholders need little capital gains to beat the long-term average market return.
The company is department store retailer Myer Holdings Limited (ASX: MYR), currently trading at around $2.34.
In the March 2014 quarter, Myer reported a 1% fall in total sales, while same store sales (which excludes new stores) was up just 0.2%. That comes on the back of a disappointing six months to December 2013, with net profit falling 9.4%.
As a result, analysts are expecting Myer to declare a fully franked 5 cent final dividend for the second half, to go with the 9 cent interim dividend. On that basis, Myer is offering a yield of 6.0%, but it's entirely possible the retailer could increase the second half dividend above market expectations, resulting in a higher yield.
The problem for investors is the uncertain future for Myer, with a boatload of foreign fashion houses setting up shop in Australia, and the rise of internet-only retailers. Department stores also face structural issues as consumers prefer to shop at niche retailers, such as in fashion and electronic products, with some talk that department stores are dinosaurs facing an imminent death.
Still, South Africa's Woolworths Holdings saw the value in Myer's competitor David Jones, so there may well be value in Myer, and the dividend could be some compensation until it turns the business performance around.
But if Myer's not your thing, IGA distributor Metcash Limited (ASX: MTS) is paying a 6.4% fully franked yield, while Seven West Media Ltd (ASX: SWM) sports a 5.9% fully franked yield. A company I highlighted back in April this year, Duet Group (ASX: DUE) is also paying a decent yield of 6.9%, although it's unfranked.
However, if you want dividends, growth and a cheap price, it's hard to go past this stock…
