With interest rates all set to fall again in 2015, it could be another difficult year for savers. And, with inflation being 2.3%, there's a good chance that the real return on cash will be a negative number next year, which is clearly very disappointing for anyone holding cash.
Of course, the ASX offers a sound alternative via top notch yield plays. Certainly, share prices have been hugely volatile over the last year and have fallen by 2.5% year-to-date. However, their income appeal easily beats savings rates and, if interest rates do fall next year, high-yield stocks could see improved sentiment push their share prices higher.
So, with that in mind, here are three stocks that could transform your income in 2015.
Telstra Corporation Ltd
Telstra Corporation Ltd (ASX: TLS) continues to be one of the most appealing income stocks in the ASX. Not only does it offer a fat, fully franked yield of 5.1%, it also has a relatively low beta of 0.5 which means that investing in Telstra should be a less volatile experience than investing in the wider index.
For example, for every 1% change in the value of the ASX, Telstra's share price should (in theory) move by just 0.5%. This should provide additional stability to investor portfolios moving forward and help guard against a significant fall in the ASX.
And, with Telstra having the potential to grow its bottom line through overseas expansion and via a rumoured 50%+ of the design and planning work for the NBN, now could be a good time to buy a slice of the company.
Insurance Australia Group Ltd
With a fully franked yield of 6.3%, it's little wonder that Insurance Australia Group Ltd (ASX: IAG) remains relatively popular among income-seeking investors. Like Telstra it offers a less volatile share price since it has a beta of just 0.55, which may appeal to investors who do not wish to see their portfolio valuation change in value as quickly as the ASX.
In addition, IAG continues to offer excellent value for money, which could make now a great time to buy a slice of it. For example, it trades on a P/E ratio of just 11.7, which is far less than the ASX's 14.7, and as a result it could be the subject of an upward re-rating adjustment during the course of 2015.
Suncorp Group Ltd
Suncorp Group Ltd (ASX: SUN) has had an exceptional five years, with its share price rising by 62% in this time and cash flow and earnings increasing at annualised rates of 18.2% and 12.9% respectively during the period. This has allowed Suncorp to increase dividends at a rapid rate (21.3% per annum over the same time period), which means that the diversified financial play now yields a fully franked 6.2%.
In addition, with a rationalisation and simplification plan yet to fully impact its bottom line, the medium term could prove to be rather bright for Suncorp. And, with shares in the company trading on a PEG of just 0.46, it seems to offer growth at a reasonable price to go alongside a stunning yield.
