Last month, my largest term deposit matured.
I was shattered.
Gutted, if you will.
Because you see while I held my term deposit, interest rates fell.
And I felt like a genius with my fixed rate interest rate sitting well above the current level at the time.
Unfortunately, it dawned on me that I wasn't a genius, and I'd yet again be forced to lock in an even lower interest rate on my next term deposit.
Now, I'll admit, some people love term deposits — that's fine.
However, as a long-term buy to hold sharemarket evangelist, it is gut-wrenching to lock in an annual interest rate of 2.4% – or 3% if I'm lucky – knowing full well there are far better options in the sharemarket.
Sure, share prices will go up and down in the short-run. But over the long pole, history has proven, dividends from quality companies are well worth the extra mental rigour that is required to hold shares.
So with that mind, here are three companies that offer dividends far greater than the official cash rate:
- Retail Food Group Limited (ASX: RFG) – Forecast gross dividend yield: 8.7%
Retail Food Group is the owner of fast-casual dining chains such as Crust Pizza and Donut King; and coffee brands such as Gloria Jeans. Its shares have fallen hard in recent months, and at today's prices look very cheap. In fact, I think they are so cheap that I recently bought shares for my portfolio.
- Australia and New Zealand Banking Group (ASX: ANZ) – Forecast gross dividend yield: 9.4%
According to some analysts, ANZ Bank, like its peers, will cut its dividend payout in coming years as a result of increased regulation. Nonetheless, ANZ is a top quality global bank and is aggressively expanding into the Asia Pacific region. This may help it offset the forecast weakness in the local credit market over the medium term.
- Flight Centre Travel Group Ltd (ASX: FLT) – Forecast gross dividend yield: 6.2%
Like the two companies above, Flight Centre pays fully franked dividends and remains well placed for growth over the long term. While some investors remain highly sceptical of the group's rollout of physical storefronts, the strategy continues to work well following many years of success. While short-term earnings may be impacted in the local market, Flight Centre's huge cash balance and international expansion reassure me that the best is yet to come.
Buy, Hold or Sell?
At today's prices, I think ANZ shares are not a buy. On the contrary, I think both Flight Centre and Retail Food Group are solid investments for growth and income over the long term. While their results may be a little volatile in the short-term, their excellent dividend yields certainly trump my 2.4% term deposit!
