According to leading big bank economists, the RBA is going to cut interest rates twice throughout 2015, potentially taking the official rate to just 2%.
It doesn't take an analyst to know a 2% taxable return on your investment isn't good. Especially when inflation is a meaty 2.3% and big dividend stocks are offering returns over 5%, sometimes with 100% franking!
100% franking means the entire dividend payment you'd receive has already been taxed at the company rate of 30%, giving you a franking 'credit' on your next tax return.
Here are three big dividend stocks which deserve a spot on your watchlist.
1. Super Retail Group Limited (ASX: SUL) is the owner of BCF Boating Fishing Camping, Rebel, Supercheap Auto and more. Its shareholders had a tough past year as its leisure businesses struggled to maintain profitability in the fallout of the mining boom. However in the next year, it's expected to pay a 4.7% fully franked dividend – equivalent to 6.8% grossed-up for franking credits.
2. Telstra Corporation Ltd (ASX: TLS) has one of the most reliable dividends on the ASX. This is a product of its enviable cash flows, which also allow it to invest heavily in growth areas, such as its booming Asian businesses. It is expected to declare a payout of 30 cents per share in the coming year, equivalent to 4.66%.
3. Woolworths Limited (ASX: WOW), one of two supermarket giants, has seen its shares heavily sold off in recent times, as growing concerns over its Masters home improvement business and competitive threats from international rivals take hold. However a lower share price increases its dividend yield and in 2015 investors can expect a payout equivalent to 4.5% fully franked.
Should you buy, hold, or sell these three stocks?
Although these three businesses each boast the prospect of tasty dividend yields in a low interest rate environment, investors need to look beyond the dividend yields to assess the truth worth of their underlying businesses. Indeed at today's prices I believe only Super Retail Group offers investors a respectable margin of safety. However investors could also do a lot worse than hold both Woolies and Telstra shares.
