The decision by the Reserve Bank of Australia (RBA) last week to keep the cash rate at its record low level of 2.5% has signalled to investors that the RBA remains wary of the lacklustre state of the domestic economy.
With the exception of a hot property market many other sectors of the Australian economy remain tepid. Capital spending, retail spending, consumer sentiment and employment growth all continue to appear lethargic.
With few signs of a pick-up on the horizon – with the exception of an RBA decision to raise rates to dampen a possible housing bubble – investors can expect rates to remain low. A low interest rate environment is not only likely to provide continued support for equity markets but it will also encourage investors to keep seeking out high-yielding stocks.
Here are three stocks with high yields that income-seeking investors may be keen to add to their portfolios.
- Fund manager Platinum Asset Management Limited (ASX: PTM) recently announced a big rise in its final dividend from 14 cents per share (cps) to 20 cps, taking the full year dividend to 34 cps. Assuming the firm can maintain a 34 cps dividend in the current financial year then the stock is offering shareholders a fully franked dividend yield of 5.6%.
- Shareholders in the owner of The Athlete's Foot, RCG Corporation Limited (ASX: RCG) enjoyed a rise in dividend to 4.5 cps in FY 2014 from 4 cps in FY 2013. With the stock price down around 10% in the last six months, assuming the dividend can be maintained in FY 2015, investors today should be able to purchase the stock on an impressively large fully franked yield of 7%.
- Insurance Australia Group Ltd (ASX: IAG) paid out its highest full year dividend at 39 cps since the major domestic insurer listed on the ASX. The company is enjoying solid performance at the moment and while investors need to be aware of the cyclical nature of the insurance business, assuming a consistent FY 2015 payment, then the stock currently yields 6%.
