Suffice to say, the ASX has disappointed in 2015. It is currently down by over 3% since the turn of the year and this means that many Aussie investors have seen the value of their portfolios fall year-to-date.
As a result, the income return on stocks has taken on a much more important role, with high-yield stocks having the potential to not only bring the 3%+ loss back to zero, but also to provide a total return which is higher than the current level of inflation of 1.5%. And, with interest rates likely to fall and spur increasing rates of price growth, income stocks look set to form a major part of investors' total returns over the medium term. As such, investing in sustainable dividend stocks seems to make sense at the present time.
One income stock which has disappointed even more than the ASX in 2015 is Telstra Corporation Ltd (ASX: TLS). Its shares have fallen by 9% since the turn of the year, but its fully franked yield of 5.7% helps to offset much of that loss. And, with shareholder payouts being covered 1.2 times by net profit, they appear to be sustainable over the medium term.
Looking ahead, Telstra offers growth potential as well as income appeal, with the company's planned move into healthcare providing profit potential as well as diversification away from its traditional mobile market. The mobile market, though, is also a key focus for Telstra, with it seeking to provide a more personalised service experience for both business and consumer customers which could allow it to improve margins moving forward.
And, with Telstra also diversifying geographically via a push into faster-growing Asian markets, investor sentiment could pick up and push its shares northwards – especially since they trade on the same price to earnings (P/E) ratio as the ASX of 15.6.
Meanwhile, rail freight operator Aurizon Holdings Ltd (ASX: AZJ) has bucked the wider ASX trend this year by posting share price growth of 11% since the turn of the year. Despite this, it still yields a partially franked 4.9%, which is 30 basis points higher than the yield of the wider index. And, with Aurizon's dividends set to rise at an annualised rate of 8.9% during the next two years, it appears to be a strong income play for the medium term, too.
Furthermore, Aurizon is not only dependent upon the performance of the mining industry. Certainly, its rail haulage business is largely leveraged to coal, iron ore and other commodities and may be susceptible to a wider slowdown in the mining space. However, Aurizon also has very a highly defensive earnings stream via its regulated track infrastructure and, with it being on-target to achieve a 25% operating margin, its bottom line is due to rise by over 8% per annum during the next two years.
This makes its premium rating of 17.7 seem relatively attractive and means that its shares could continue the run which has seen them post an annualised total return of over 15% during the last three years.
