After the Reserve Bank of Australia recently cut cash rates to just 1.75% many investors will rightly be looking to shares to deliver better returns than those available on term deposits or other cash savings accounts.
Banks like Westpac Banking Corp (ASX: WBC) currently offer interest rates of just 2.45% on a term deposit of one to two years. That kind of rate is not going to deliver the kind of returns required to live well on, or compound your wealth over a long period of time.
Thankfully the local share market has plenty of companies that currently offer yields double that amount with plenty of room for some capital gains too due to some attractive valuations.
Below I have two investment options to consider for investors who like cheap-looking shares with big yields.
Dicker Data Ltd (ASX: DDR) is a founder-led distributor of IT hardware products to over 3,000 resellers within Australia. Despite a consistent history of strong profit growth this company still travels under the radar of many investors due to its relatively small size with a market value around $295 million.
The company recently forecast a net profit after tax of $24.5 million for FY16, with expectations for 15.4 cents per share in dividends to be paid this year. This puts it on a fully franked estimated forward yield of 8.3% when selling for $1.85 per share today. It trades on just 11x trailing earnings, with a forecast for profits to grow 11% over the year ahead. Needless to say, on these metrics it looks a term-deposit-thumping bargain.
Retail Food Group Limited (ASX: RFG) is in the coffee, pizza, cake and donuts business via its work as a franchisor of popular food and beverage outlets like Gloria Jean's coffee, Donut King, Pizza Capers, The Coffee Guy and Brumby's Bakeries.
Led by an experienced management team this is another under-the-radar business with a strong track record of profit and dividend growth. It is also expanding overseas and deepening its leverage to the growth in demand for coffee via its wholesale roasting and distribution activities.
Market nervousness over the soft outlook for the domestic economy means the shares sell for $5.28 on just 12.5x estimated forward earnings of 41.7 cents per share in FY16. The business could be expected to pay out at least 28 cents per share in dividends over FY16, which would place it on a fully franked yield of 5.3% at today's valuations.
