With the RBA leaving interest rates on hold for the twelfth consecutive time, investors are finding it hard to earn appropriate returns on their investments, given term deposit rates as low as 3%. However, looking at the Australian stock market, I can see companies offering stunning fully franked dividend yields as the S&P/ASX200 (INDEXASX:XJO) continues its run of growth.
Here are three stocks that I think offer investors beautiful dividend yields, in addition to long-term tailwinds to drive future growth, all at a reasonable price.
1. Australia's largest investment bank Macquarie Group Ltd (ASX: MQG) is my favourite Australian dividend play, providing investors a tasty dividend yield of 4.8%. Given rising equity markets and the gradual economic recovery, Macquarie has a unique opportunity to capitalise on improving global confidence. Furthermore, its 2013 acquisition of ING Investment Management Korea, with $25 billion under management, increases its exposure to the booming Asian economy. Asia made up about 13% of Macquarie's income in FY14.
Macquarie sits on an attractive valuation, with a price-to-earnings ratio of 15 and an excellent track record of delivering shareholder gains in the past 10 years. This is a stock to hold onto.
2. Collins Foods Ltd (ASX: CKF) is a small cap firm, owning and operating big names such as KFC and Sizzler restaurants throughout Australia and Asia. Collins Foods offers the same 4.8% dividend as Macquarie, but it is fully franked, giving investors more to smile about. Although sales in its Sizzler stores have been weighing down growth in its KFC franchises, its 2013 acquisition of 44 KFC outlets allows it to boost growth and capture a growing market share in the Australian fast food industry.
With management providing an optimistic update on FY15 results, I think its cheap price-to-earnings ratio of 12 allows long-term investors to reap some sweet returns.
3. Collection House Limited (ASX: CLH) is a debt collections company operating throughout Australia, New Zealand and the Philippines. Shares have recently had a terrific run, hitting 52-week highs after its strong FY14 results. However, I still think there's more growth to come with management remaining focused on developing the business over the next 12 months. Collection House is expanding its collection services and continuing to buy Purchase Debt Ledgers (PDLs) as part of its business model. This allows it to earn stunning returns on investments and build the foundation for more earnings growth.
Collection House offers a 3.8% fully franked dividend yield, but despite the recent gains it still trades on an attractive price-to-earnings ratio of 14. I think Collection House offers an effective investment option to support your retirement.
