Although life for savers is tough at the moment, it is likely to get even more difficult. Certainly, an interest rate of just 2% is causing many investors with substantial cash balances to struggle to find a decent return, but things are likely to get worse before they get better for savers. That's because, while a housing bubble is seemingly on the cards, a faltering economy may force the hand of the RBA to provide a stimulus in the form of ever looser monetary policy.
Furthermore, with the ASX remaining relatively volatile, many savers are unsure about turning to high-yielding stocks as the answer to their return quandary. That's understandable – after all, the ASX is down almost 3% in the last month even when the upbeat performance of recent days is factored in.
However, there are a number of stocks on the ASX that continue to offer a potent mix of high, sustainable yields as well as bright futures. Here are three prime examples that appear to be well-worth buying at the present time.
AMP Limited
Although AMP Limited (ASX: AMP) paid a relatively small dividend of $0.135 per share last year, it is expected to post stunning dividend growth over the next two years. In fact, AMP's dividends are forecast to rise to $0.32 per share, which is an increase of 137% and puts the wealth management company on a forward (and partially franked) dividend yield of 4.9%.
Furthermore, AMP's dividend appears to be sustainable, with its dividend coverage ratio due to hit 1.3x next year. And, while its price to earnings (P/E) ratio of 19.9 is higher than both the ASX (17) and the wider insurance sector (19.5), AMP's price to earnings growth (PEG) ratio of 1 indicates that its shares could continue to move upwards – even though they are already 21% up in 2015.
Telstra Corporation Ltd
Although Telstra Corporation Ltd (ASX: TLS) is viewed by many investors as a quasi-utility, it is currently undergoing a transitional period that is seeing its focus move away from Australia and toward Asia. This should provide it with much more impressive growth potential in the long run and its dividend yield of 4.7% continues to beat that of the ASX, which has a yield of 4.3% right now.
In addition, Telstra increased dividends by 5.4% last year and, with growth potential in new regions and new markets (such as health care), it is likely that real terms increases will continue. In fact, Telstra is expected to increase dividends per share at an annualised rate of 3.7% over the next two years which, when combined with its superb balance sheet and robust cash flow, indicates that its income prospects are sustainable as well as impressive.
Wesfarmers Ltd
The recent strategy day from Wesfarmers Ltd (ASX: WES) highlighted that the conglomerate remains a well run and financially sound business. Furthermore, it has an excellent track record of dividend growth, with them having increased on a per share basis at an annualised rate of 12.5% during the last five years. And, while the outlook for the wider Aussie economy and, specifically, for the retail sector may be somewhat uncertain, Wesfarmers is still forecast to increase shareholder payouts by 4.9% per annum during the next two years.
This rate of dividend growth puts it on a forward yield of 5% which, when combined with a price to sales (P/S) ratio of 0.84, means that it offers significant appeal – especially when the ASX has a P/S ratio of 1.61.
