With the cash rate at a record low in Australia, deposits in "high-interest" savings accounts are barely beating the inflation rate once you take into consideration tax implications. It's no wonder that investors are on the hunt for quality companies that pay sustainable, high-yield dividends. Here are three of my current favourites that I believe income-seeking investors should consider:
Retail Food Group Limited (ASX: RFG)
Retail Food Group is a global franchisor and coffee wholesaler. It operates through well-known brands such as Gloria Jean's Coffee, Donut King and Di Bella Coffee. The group started out in 1989 operating 50 Donut King stores and has grown into a $1 billion dollar public company with over 2,500 outlets throughout Australia, Asia, Europe and the United States.
Since listing in 2006, Retail Food Group's growth has seen its share price increase by over 500%. The company has ambitions for further international expansion and recently affirmed its expectations for underlying profit growth of 20% for FY2017. Retail Food Group has managed to increase its dividend payout on the last 21 occasions and currently yields 5.5%, fully-franked.
ASX Ltd (ASX: ASX)
ASX operates Australia's primary securities exchange. It has only a single, much smaller competitor in terms of providing a trading market (matching buyers and sellers) and enjoys a monopoly on clearing and settlement, which is when actual money changes hands. The company has defensive qualities somewhat similar to listed infrastructure operators like Sydney Airport Holdings Ltd (ASX: SYD), yet to me it appears to have a much lower profile among investment commentators.
Regardless, ASX has become popular among income investors of late. The company's share price is up 20% in the last 12 months, which has brought its fully-franked dividend yield down to around 3.9%.
National Australia Bank Ltd (ASX: NAB)
I know its an obvious choice, but NAB's 6% fully-franked dividend makes it impossible not to mention here. There aren't many top companies on the ASX that can match the big banks on yield, and I believe they will continue to reward income investors for the foreseeable future. The banking sector reported strongly during the recent earnings season and investor confidence in the Big 4 has returned. NAB in particular has performed well and its share price is up more than 20% in the last 12 months.
Of the three companies I've mentioned, ASX is my favourite due to its defensive characteristics and monopoly on certain parts of its operations. However based on current market prices, I believe Retail Food Group could offer investors superior long-term returns.
