With interest rates at just 2.5%, life as an income investor or saver is pretty tough at the moment.
After all, even if you can get a little more than 2.5% on your savings, you're still only slightly up in real terms, since inflation currently stands at 2.3%.
However, there is a relatively simple way of increasing your income returns. The answer is to buy shares in top quality ASX companies that are forecast to grow dividends in 2015.
Indeed, here are three stocks that have strong future potential and are expected to average a yield of 5% between them in 2015.
National Australia Bank Ltd.
With a yield of 5.8%, National Australia Bank Ltd. (ASX: NAB) already looks like a top income play.
However, there could be more to come from NAB in 2015, since the bank is expected to raise its dividend by 5.5% in FY 2015. This means that it could be yielding as much as 6.1% next year.
And, although recent results were somewhat disappointing, with NAB announcing a fall in profit of 10%, it continues to have bright future potential. That's because earnings are expected to rise by 28% next year which, when combined with a P/E ratio of 15.6, equates to a PEG ratio of just 0.56.
QBE Insurance Group Ltd
Although QBE Insurance Group Ltd (ASX: QBE) currently yields just 3.2% (fully franked), income hunters shouldn't be put off by such a mediocre headline figure. That's because QBE is emerging from a challenging period. Under new management it has conducted a strategic review and seems to be on a stronger path to growth.
In fact, its bottom line is due to return to the black this year and that means dividend rises are on the horizon. Indeed, QBE is expected to increase dividends by a whopping 27% next year, which puts the insurance play on a forward yield of 4.5%. Clearly, that's very attractive for income-seeking investors.
Santos Ltd
As with QBE, Santos Ltd (ASX: STO) doesn't currently pay a particularly enticing yield. In fact, it's only just higher than the interest rate at 2.8% (fully franked). However, Santos is on the brink of a growth spurt resulting from its GLNG project coming online in 2015.
This should allow it to deliver rapid dividend growth in the near term, with Santos on track to yield 4.3% in 2015 as a result of strong earnings growth.
Certainly, a lower oil price could cause earnings growth to disappoint in the near-term, particularly as it seems as though producers such as Saudi Arabia are willing to slash prices to maintain market share. However, with dividends being covered 1.5 times, it appears as though Santos has sufficient headroom to cope with a slight earnings disappointment moving forward.
So, with yields of 6.1%, 4.5% and 4.3% expected in 2015, NAB, QBE and Santos could, when combined, provide you with a yield of 5% next year. Indeed, by investing in a range of high quality dividend-paying stocks, I believe that everyone can generate a decent level of income from their capital.
