As share prices slip, dividend yields rise little by little and become very attractive to income investors. Looking over the companies which have a huge yield and good five-year earnings per share growth, I came up with a shortlist of three quality companies that Foolish investors would appreciate. In the recent market weakness, these three are showing good value. Picking them up now while they are relatively cheap could give you a better return many years from now in your retirement portfolio.
1) Suncorp Group Ltd (ASX: SUN) is now standing at a very generous 6.1% yield fully franked. The insurer and banker is dealing with the recent Brisbane storm damage claims, but it has adequate natural peril claims provisions as well as reinsurance which caps its total financial exposure. It's trading at about 18 times earnings, yet its price-earnings to growth (PEG) ratio is way below 1, signalling a relative discount in price compared to expected growth. 2015 and 2016 should see big cost savings from the company's business simplification program. There may even be further capital returns, which could send dividends up. It's a good dividend stock to have in your diversified portfolio.
2) Super Retail Group Ltd (ASX: SUL), the specialty retailer with brands like Supercheap Auto, Rebel Sports, BCF and Amart Sports, has fallen again from mixed signs that this Christmas shopping season for general retail trade may not see a big improvement over last year. Today, the stock is down about 2.6% to $6.77. That's almost 50% down from one year ago. The company has kept increasing its dividend, which lifts the yield to a great 5.7% fully franked. Super Retail's auto accessories business has been doing alright, but the weakness is coming from its leisure retailing. If this is a temporary situation, then the company could be a good buy now. Starting a position would be reasonable for the yield alone.
3) Lastly, RCG Corporation Limited (ASX: RCG) currently yields a fantastic 7.0% fully franked. The shoe distributor and operator of the Athelete's Foot store chain in Australia saw good earnings growth in FY 2014, as well as significant cash flows. The consensus forecast for earnings growth is about 11% per year over the next couple of years. That's solid growth. Two recent acquisitions have boosted revenue and earnings. It is looking for more good deals, but if none occur the company plans to keep a high dividend payout ratio. I would keep this one on the watchlist for now. It may hit new highs soon and the holiday season sales will show how strong shoe apparel sales are at the moment. Watch for these two indicators and be ready to strike.
