With Aussie interest rates likely to remain at 2.5% for the foreseeable future, life as an income investor could remain challenging. In fact, with the RBA seemingly willing to risk a housing bubble to ensure the economy stays on-track, a rate of below 2.5% seems to be on the cards.
Clearly, this would be bad news for income investors and if that prospect isn't disappointing enough the recent fall in the ASX has wiped billions off the value of the index, too.
However, the combination of a low interest rate and a fall in the ASX could have created an opportunity to buy high-yielding companies at even more attractive prices. With that in mind, here are three that could give your income a boost for a very attractive price.
BHP Billiton Limited
Now may seem like the wrong time to buy BHP Billiton Limited (ASX: BHP). After all the price of iron ore has tumbled in recent months. However, more disappointment in this respect seems to be priced in, with shares trading on an attractive valuation at present.
For example, BHP Billiton currently has a P/E ratio of just 12.7, which is considerably below the ASX's P/E ratio of 15.3. Furthermore, BHP offers a fully franked yield of 4%, which is well covered by profit (2.1 times in the most recent financial year), and with dividends per share set to grow by 7.4% per annum over the next two years, the company could become a more valuable income play moving forward.
Insurance Australia Group Ltd
Shares in Insurance Australia Group Ltd (ASX: IAG) have tracked the index over the last month and are down 5% during the period. However, they could become more in-demand in future as a result of a fat, fully franked yield of 6.3% and a relatively low P/E ratio of 11.3.
Certainly, forecasts for IAG are disappointing, with earnings due to fall by 11.6% in the current year. However, a comeback is expected next year, with growth of 6.9% pencilled in. This means that dividends should continue to be well covered, which makes IAG a great value and very appealing income stock.
Commonwealth Bank of Australia
With a fully franked yield of 5.4%, Commonwealth Bank of Australia (ASX: CBA) is an obvious income choice. Certainly, its current P/E of 14.1 looks rather rich, but when the ASX has a P/E ratio of 15.3, it seems to be very reasonable on a relative basis.
In addition, Commonwealth Bank is expected to grow earnings and dividends at a moderate pace moving forward. For example, earnings are set to grow at an annualised rate of 5.6% and dividends at an annualised rate of 5.2% over the next two years. Furthermore, with the RBA looking set to keep rates low over the medium term, Commonwealth Bank could continue to benefit from a buoyant housing market in future years.
