It's a difficult time for savers. Indeed, the current interest rate is just 0.2% higher than the inflation rate, which means that gross real returns from cash balances are minimal at best.
Furthermore, the situation appears unlikely to improve in the short run, with the RBA apparently willing to move lower with interest rates as they seek to stimulate the Aussie economy and increase the number of jobs on offer.
However, there is hope for income seekers in the form of high yield shares. And, with the ASX having been flat in 2014, there is good value on offer, too. With that in mind, here are three ASX stocks that could fit the bill for income investors.
Westpac Banking Corp
With a fully franked dividend yield of 5.8%, Westpac Banking Corp (ASX: WBC) offers an income that is around twice anything on offer in a savings account. Furthermore, dividends per share are expected to rise at an annualised rate of 4.5% over the next two years, which means that shares in Westpac could be yielding as much as 6.2% in FY 2016.
Of course, with a new CEO set to take the reins next year, the near term could be a period of higher uncertainty for the bank due to the potential for a new strategy from the new person at the top. However, with Westpac being heavily focused on Australia, it still seems likely to deliver upbeat performance in 2015 due to favourable monetary policy conditions, which may mean fewer bad loans and higher demand for new loans.
With shares in Westpac trading on a P/E ratio of 13.1, versus 15.1 for the ASX, there could be some upside from an upward re-rating to go alongside a superb income return.
Insurance Australia Group Ltd
Although dividends per share are set to fall at an annualised rate of 2.3% over the next two years, Insurance Australia Group Ltd (ASX: IAG) still offers excellent income prospects. Indeed, even with a lower dividend due to be paid in FY 2016, shares in the insurer could still yield as much as 5.9% (fully franked) in FY 2016, thereby making them a sound income play.
The decision to reduce dividends comes at a time when IAG is undergoing something of a transition, as it seeks to integrate the underwriting business of Wesfarmers into the wider firm. With dividends lowered, IAG's dividend coverage ratio looks set to remain very comfortable over the next couple of years, with it forecast to be an impressive 1.4 in FY 2016.
With shares in IAG trading on a P/E ratio of just 11.9, there could be capital gains on the horizon, too.
Origin Energy Ltd
Origin Energy Ltd (ASX: ORG) may not be the most obvious choice for income investors, but the oil-focused company has grand plans for its shareholder payouts over the next couple of years.
Indeed, it is forecast to increase dividends per share at an annualised rate of 18.3% over the next couple of years, which means that shares in the company could be yielding as much as 5.4% (unfranked) in FY 2016. And, just as importantly, profits are expected to cover dividends 1.7 times, as Origin's exposure to the LNG market looks set to more than make up for the recent fall in the oil price.
With shares in Origin trading on a PEG ratio of just 0.57 and having such strong income prospects, they could be a realistic alternative to a savings account at the present time.
