Australia's cash rate has been stuck at a meagre 2% since May 2015, and there are reasons to believe it could fall even lower before the end of the year.
While that may be great for mortgagees and other borrowers, it is by no means ideal for savers and those who rely on a stream of income without too much risk being attached.
Most retirees fit this description. Indeed, the wealth that a person has when they hit retirement is what they need to survive off for what can be years, or even decades, meaning that they often cannot afford to take on too much risk.
For that reason, many prefer to simply keep their cash in the bank and live off the interest, but in this low interest rate environment, that strategy is unlikely to get them too far.
Investing in the share market can be a risky alternative, although there are ways to mitigate those risks. One way is to ensure you maintain a diversified portfolio – ensuring you aren't overly exposed to any one company or risk – while you can also invest in well-established businesses, or those with a reliable revenue stream.
While it is always wise to keep some of your money in cash, here are the names of five shares you could consider adding to your portfolio today…
- Wesfarmers Ltd (ASX: WES) is an ever-reliable company, and the owner of businesses such as Coles and Bunnings Warehouse. The shares also offer a 4.8% fully franked dividend yield, or 6.9% grossed up.
- Telstra Corporation Ltd (ASX: TLS) is regarded as Australia's best telecommunications provider while it is also known for its legendary dividend yield. Currently, the shares offer a fully franked yield of 5.7%, grossed to 8.2%.
- Burson Group Ltd (ASX: BAP) – soon to be called Bapcor – provides the parts for the servicing and repair of older vehicles. It's growing both organically and by acquisition and offers a defensive revenue stream. The shares yield just under 2% today (fully franked), but that should grow over time.
- Retail Food Group Limited (ASX: RFG) is a master franchisor behind businesses such as Gloria Jean's and Donut King. It has plenty of room to grow – particularly in foreign markets – and its shares are trading at what appear to be a very reasonable price. As a bonus, they offer a fully franked 4.9% dividend yield, grossed to 6.9%.
- Westfield Corp Ltd (ASX: WFD) is the owner and operator of Westfield-branded shopping centres in the US and the UK. At $9.94 per share and with $1 buying US77 cents, the shares offer a 3.3% dividend yield (note that the group's earnings and dividends are reported in terms of US dollars). That should improve if, or when, the Australian dollar falls compared to the US greenback.
At today's prices, my pick of the bunch would likely be Retail Food Group, although I certainly like Burson Group as a business as well (note that I do own shares in both of these companies).
