It's no secret that the returns from cash and term deposits are pretty unappealing right now.
According to Canstar, the best rate on a 12-month term deposit is currently 3.30% and that is being offered by the Queensland Police Credit Union.
Perhaps more interesting to note are the rates being offered by the big four banks which range from 2.45% (Westpac Banking Corp (ASX: WBC)) to 2.35% (Commonwealth Bank of Australia (ASX: CBA)). It is clear from this, that if you do want to park your money in cash, you should at least consider some of the smaller providers in the market.
In any case, the after-tax and inflation-adjusted returns from term deposits are unlikely to be enough for most investors. While it is prudent to keep a proportion of your money in cash for unforeseen circumstances, those investors comfortable with long term investing should consider investing in the sharemarket.
Using my online brokerage account, I conducted a search for shares with a market capitalisation of more than $500 million, offering a dividend yield of more than 3.5% and a dividend payout ratio of less than 70%. Putting a limit on the payout ratio obviously narrowed my results but I think it is important for most businesses to retain a good proportion of their profits for reinvestment.
From these results, a number of good quality companies popped up including:
Macquarie Group Ltd (ASX: MQG)
Macquarie delivered an excellent FY16 result last week and although the shares have rebounded strongly this week, they are still down by around 18% from their 52-week highs. The company expects to deliver a similar profit result in FY17 although investors can expect a better result if the Australian dollar depreciates from here. The shares are currently offering a 40% franked dividend yield of 5.8%.
Flight Centre Travel Group Ltd (ASX: FLT)
Flight Centre has excellent brand positioning within Australia and is often the first port of call for travellers with complicated travel plans. Although growth domestically has slowed over the past year or so, the company is expanding into new international regions which is providing attractive levels of growth. The company has an extremely strong balance sheet and investors can expect to receive a fully franked dividend of 4.1%.
Tassal Group Limited (ASX: TGR)
Tassal's first half profit growth came in below market expectations as lower salmon prices and a weaker-than-expected contribution from its recent De Costi acquisition weighed on margins. Despite this, the longer-term consumer consumption trends are still in place for the salmon producer and the company will have the ability to leverage its position into the broader seafood market over the next 12 months. The shares appear reasonably valued at the moment, trading at around 11.5x earnings, and offering a forecast FY16 dividend yield of around 4.1%.
Are you looking for three more dividend stocks that could boost your returns over the next 12 months?
