Interest rates will fall again in 2016 to a new record low of just 1.75%, down from their current 2% rate.
That's the view taken by Citigroup, at least, which has forecast a 100% chance of an official interest rate cut at the Reserve Bank of Australia's June 2016 board meeting. That's up from a 50% chance late last year. They're not the only ones forecasting such a move with other analysts suggesting a cash rate of just 1.5% by the end of 2016 is plausible.
Of course, there's every chance that the RBA could look to make a move even sooner than June. China, which is Australia's largest trading partner, is now growing at its slowest rate in 25 years and dragging commodity prices down with it.
There are fears regarding the growth prospects of Australia's own economy which the RBA could look to curb by providing more economic stimulus in the form of cheaper debt.
While that's bad news for most retirees, and households which are holding loads of cash, such a move could spark a renewed interest in high-yielding dividend shares. As a result of the recent declines endured by the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), there are plenty of attractive opportunities for dividend investors to take advantage of, including the following three:
- Retail Food Group Limited (ASX: RFG) is a master franchisor of businesses such as Gloria Jean's and Donut King. While it has consistently generated strong earnings and dividend growth for shareholders since it first debuted on the ASX almost 10 years ago, that trend should continue as it expands its international presence and store count. At $4.18, the shares are not only trading at a nearly 48% discount to their 52-week high, but also offer a 6% fully franked dividend yield.
- Westfield Corp Ltd (ASX: WFD) is a global shopping centre giant, with a strong presence in the United Kingdom and especially in the United States. As it doesn't generate any of its earnings in Australia it can't attach any franking credits to its dividends yet it does offer a decent yield. In August it said it was on track to pay shareholders US25.1 cents (AU36.4 cents) per share for the 2015 year, which equates to a 3.8% dividend yield at today's share price.
- Wesfarmers Ltd (ASX: WES) is a stable business which has time and time again proven its ability to weather tough economic environments. With strong businesses in its arsenal, including Coles, Bunnings Warehouse and Officeworks, Wesfarmers could help form a solid foundation for your portfolio, especially with the shares offering a 5.1% fully franked dividend yield.
Of course, investing in the share market always carries a higher element of risk than simply keeping your money in a bank account, but with interest rates set to fall, such a move may be necessary for your long-term wealth. While I think Retail Food Group could provide the greatest growth of any of the three companies mentioned above, Wesfarmers could be the safest bet for investors with less of a tolerance for risk.
