Investing in high-yielding dividend stocks is a great way to boost your wealth, especially in this low interest rate environment. The cash rate is currently stuck at 2% but with forecasts suggesting it'll drop to 1.5% (possibly before the end of the year) it's not too late to get started!
Unfortunately however, it's not as simple as buying any old company that pays a dividend. To begin with, companies aren't guaranteed to make a payment to shareholders – they will only do so if they believe the business is in a solid enough position to do so. So you'll first want to make sure they're capable of making those payments, and preferably even growing them over time.
Investors also need to consider the price they'd be willing to pay for the shares, and determine whether they present as decent value at the time. Recently, there has been a huge question mark hovering over companies such as Commonwealth Bank of Australia (ASX: CBA) and BHP Billiton Limited (ASX: BHP) for this very reason.
Commonwealth Bank has, for a long time, been the typical go-to stock for income investors. But with the bank now facing tougher regulations and other strong headwinds, its shares could well have further to fall. Likewise, BHP Billiton is struggling under the weight of collapsing commodity prices which could fall further in the coming months.
Personally, I think investors should avoid both of these blue-chip companies, especially considering there are so many other great opportunities currently presenting themselves.
4 fully franked dividend stocks to buy today
One thing to look out for in a company offering a solid yield is its history for growing earnings, and its ability to continue doing so in the future. This should allow it to also increase its dividend, therefore improving your overall returns.
Retail Food Group Limited (ASX: RFG) is one great example. The company, which owns brands like Gloria Jean's coffee and Donut King, has increased its dividend per share by a compounded annual growth rate of nearly 18% since 2007 (this is despite issuing new shares in the time since). The shares trade on a forecast 5.7% fully franked yield.
Telstra Corporation Ltd (ASX: TLS) is another reasonable option. The shares have fallen sharply in recent months, offering investors a great opportunity to buy at a discounted price. In addition, they come with a 5.8% fully franked dividend yield.
Greencross Limited (ASX: GXL) is a pet care retailer, while it also provides veterinary services around Australia. Although the rollup strategy it is pursuing certainly comes with risks attached, I also think the shares offer compelling value at today's price. The stock also yields a forecast 3.4%, fully franked yield.
Insurance Australia Group Ltd (ASX: IAG) has had a rough trot, but recovered recently after announcing it would not pursue further investment in China. The company, which is backed by legendary investor Warren Buffett, will instead pursue growth locally and in New Zealand which is a safer option moving forward. The shares trade on a fully franked dividend yield of 5.3%.
