Don't let the recent bounce in commodities and brighter Chinese economic data fool you into thinking the dividend trade is drawing to a close.
High yielding stocks, which have been the star performers on the market over the past year or two, will remain in favour well into 2016 and we can thank the Australian dollar for that.
The Aussie jumped as the market pushed back expectations of a US interest rate hike till after the New Year and the Aussie is currently trading comfortably above US73 cents from around US69 cents in a little over a month.
The Reserve Bank of Australia will be eyeing the exchange rate nervously as we need the Aussie to be trading with a "6" in front of it to escape a potential recession due to the commodities slump.
If the Australian dollar doesn't soften, we will probably see another interest rate cut on Melbourne Cup day on November 3.
This will put the focus sharply on high yielders and I expect the banks to outperform on the back of this thematic even as the sector is facing a number of headwinds, including the potential for an aggressive war for market share between the Big Four banks as they focus on growing their domestic mortgage businesses at a time when the market is set to shrink.
But banks aren't the only ones that will look enticing to dividend-hungry investors. In fact there are probably better options from companies that operate in a more benign operating environment.
The first stock worth looking at is fertility treatment company Monash IVF Group Ltd (ASX: MVF) with its forecast yield of around 8.7% including franking for the current financial year.
The yield is high because the stock has fallen close to 20% over the past year on fears that demand for its services will fall and stay below the historical trend.
There are also worries that growing competition from the likes of Primary Health Care Limited (ASX: PRY) will put further pressure on earnings.
I think the fears are overblown as there is nothing structurally wrong with the business or the industry. In vitro fertilisation (IVF) data is volatile and I believe demand will return to the mean over the next few months.
Monash IVF Group is also well placed to meet the competitive threat due to its expansion into no-frills IVF clinics.
Another high-yielder to look at is embattled wealth manager Perpetual Limited (ASX: PPT) with its fully franked grossed-up yield of around 8.5%.
The stock has crashed 31% over the past six months due to poor performance from its key funds and a change in portfolio managers. These are issues investors should be cognisant of but I think the sell-off is overdone.
The fact is Perpetual has a very strong brand name and is well placed to benefit from our compulsory superannuation system.
The stock deserved to be punished, but it is now trading at levels which I think represent good value – particularly for income-seeking investors.
The third stock is theme park and leisure facilities operator Ardent Leisure Group (ASX: AAD) with its forecast yield of a little over 5%.
That may not be as juicy as the yields of the other two but is still attractive given that the local cash rate is likely to drop to 1.75% before the year end.
Ardent Leisure is starting to recover nicely after a big de-rating on the back of a change in its chief executive and weaker-than-expected performance from its gyms division.
But sentiment has improved and is likely to improve further given the boom in the local tourism industry and the upside from its US-based entertainment centre business, Main Event.
