Despite a plunging Australian dollar, uncertainty regarding European quantitative easing and rising US interest rates, 2015 is likely to be another year characterised by investors' predilection for yield.
Indeed the interest rates on offer from government bonds in the US, Europe and locally, are lacklustre. Meaning shares of high-quality dividend-paying stocks will still be in vogue, especially the fully franked variety.
But there are some risks…
Firstly, investors must be prepared to exercise patience. If a share price seems expensive, it probably is.
Indeed, whilst taking money from term deposits with 3% yields and sticking it in dividend stocks with 7% returns sounds easy enough, share prices are volatile and capital risk is ever present in the sharemarket. Paying too high a price for a security could leave you vulnerable during a selloff.
Finally, investing in the share market should only be considered if you believe you will not need the money, for five years or more.
3 rock-solid dividend stocks for your watchlist
- Australia and New Zealand Banking Group (ASX: ANZ) is our third largest bank by market capitalisation but, like its peers, its shares don't come cheap. Whilst its 5.7% fully franked dividend may be sustainable, I believe fair value lies around $30 per share. So I'd like to see a price well below that before hitting the buy button.
- Suncorp Group Ltd (ASX: SUN) is a leading regional bank and insurance heavyweight. In the fallout of the GFC, Suncorp was swamped with a portfolio of bad commercial property loans. However the owner of brands such as AAMI, Bingle, GIO and Apia now appears to have recovered with a forecast dividend yield of 6% on offer.
- Bank of Queensland Limited (ASX: BOQ) is another bank offering up a strong dividend yield and the prospect of long-term earnings per share growth. The growing owner-managed retail bank prides itself on customer satisfaction and has been kicking goals for shareholders in recent years. Despite its 5.7% fully franked dividend however waiting for a lower price is advisable.
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