Did you know many analysts expect Australian interest rates to go LOWER?
That's right, interest rates are already at a record-low 2%, but they could be headed even lower.
The Sydney Morning Herald recently quoted Credit Suisse analyst, Damien Boey, as saying, "People are coming around more to the view that rate cuts will be required."
Yep, you guessed it. That means lower returns on term deposits, savings accounts and everything in between.
Unfortunately, those worst affected by lower official interest rates are the pensioners and retirees who rely on a stable income stream. Current interest rates have already taken their toll on living standards because the financial advice given to many retirees assumes 'normal interest rates' of around 5% to live 'comfortably'.
Ultimately, older Australians are left with two tough choices:
- Have less to retire on; or
- Move further up the risk curve, from safe assets like cash to property or shares
In recent years, moving further up the risk curve has served property investors very well, but research from analysts at Macquarie Bank suggests Australian property prices could fall by as much as 7.5% over the coming two years.
3 fully franked dividend shares every retiree should own
In contrast with the meagre 2% return from interest rate accounts, shares in some of Australia's leading blue-chip companies offer tax-effective yields in excess of 5%.
- Wesfarmers Ltd (ASX: WES)
The $44 billion owner of Coles, Bunnings Warehouse, Kmart and much more can be considered a core holding in portfolios. Unlike its key rival, Woolworths, Wesfarmers' supermarkets and retail businesses are growing strongly in the face of increased competition. When its tax-effective franking credits are included, Wesfarmers' shares are expected to pay a dividend of 7.4%, according to Morningstar.
- Westfield Corp Ltd (ASX: WFD)
Westfield Corp is the global arm of the Lowy family's Westfield shopping centres. The company offers local investors exposure to international property and all sales are recorded in US dollars. Although the company does not offer franking credits with its dividends, it's expected to yield a dividend equivalent to 3.5% in the next year, while also giving shareholders long-term growth potential.
- Telstra Corporation Ltd (ASX: TLS)
Telstra is one of the local sharemarket's most reliable dividend-paying companies. Despite investing heavily in new mobile networks, products and an international expansion into Asia; Telstra's expected to pay a grossed-up dividend of more than 8% in the coming 12 months. Moreover, wide profit margins, dominant market share and international expansion bode well for the sustainability of its dividend over time.
