Low interest rates are here to stay. In fact, they could fall even further than their current level of 2 per cent with analysts from Australia and New Zealand Banking Group (ASX: ANZ) suggesting they'll hit 1.5 per cent in the first half of 2016.
While that's great news for consumers and businesses with heavy debt loads, it comes as a huge blow for retirees who often rely on interest payments as a regular source of income.
One of the best ways to overcome this problem is by investing in solid, high-yield dividend stocks – especially those with the capacity to generate reasonable capital gains as well. These dividends can not only provide a regular source of income, but the proceeds can far outweigh the alternative returns from term deposits or other savings accounts, where you'd be lucky to earn 3 per cent per annum.
Here are three strong ASX stocks that could offer significant value today.
Telstra Corporation Ltd (ASX: TLS) needs no introduction, but its shares have fallen sharply since August and could be worth considering. Indeed, Telstra is one of Australia's strongest corporations, offering shareholders safety, peace of mind and a legendary 5.6 per cent fully franked dividend yield. With franking credits included, that's a yield of 8 per cent.
Retail Food Group Limited (ASX: RFG) is Australia's biggest retail food brand manager with companies like Gloria Jean's coffee, Pizza Capers and Donut King headlining its portfolio. While it has a strong track record for growing sales and earnings, it has also increased its dividend per share by a compounded annual growth rate of almost 18% since the 2007 financial year, despite issuing new shares in the time since (thus diluting that growth). The shares offer great value today and trade on a forecast 5.8 per cent fully franked dividend yield, according to Morningstar, or grossed up to 8.3 per cent.
Collection House Limited (ASX: CLH) operates as a receivables management group – or debt collection, to you and me – and makes most of its money by buying debt from other companies and pocketing whatever cash it successfully retrieves. It recorded earnings per share growth of 17 per cent during the 2015 financial year, yet the shares still trade on a price-earnings ratio of a mere 13x last year's earnings. Thus, this company appears undervalued and offers a compelling 4.2 per cent dividend yield, grossed to 6 per cent.
