The focus on dividends may have cost self-managed super funds (SMSFs) in terms of performance over the last few years according to Credit Suisse.
But the broker believes the army of SMSFs, sometimes affectionately known as selfies, can lift their game in 2018 by focusing on 14 stocks that can provide both growth and a decent yield.
In an interview with the Australian Financial Review, Credit Suisse strategist Hasan Tevfik said that selfies have amassed assets worth $700 billion and are sitting on a pile of cash.
This pile is likely to be put to work in 2018 as the Reserve Bank of Australia governor, Philip Lowe, has recently indicated that interest rates will stay lower for longer in this country even as the US Federal Reserve is preparing to lift rates next month.
This means the very low returns from savings and term deposits are likely to burn a hole in your pocket from an opportunity cost perspective. It doesn't pay to sit on cash and selfies will be under increasing pressure to put their capital to work.
With the domestic property market showing signs of weakness with lenders clamping down on investment loans and as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) challenges a 10-year high, equities are likely to attract more attention from investors.
One way that selfies can improve their returns is to screen stocks not only for yield but a few other traits, such as earnings momentum, according to Mr Tevfik. He estimates that if selfies used this strategy, they would have made an extra 2.7 percentage points.
Stocks that fit into the dividend and earnings momentum mould include energy company AGL Energy Ltd (ASX: AGL), Australia's mortgage lender Commonwealth Bank of Australia (ASX: CBA), fuel supplier Caltex Australia Limited (ASX: CTX), engineering group Downer EDI Limited (ASX: DOW), financial services group Eclipx Group Ltd (ASX: ECX), property group GPT Group (ASX: GPT), investment bank Macquarie Group Ltd (ASX: MQG), salary packaging firm McMillan Shakespeare Limited (ASX: MMS), grocery supplier Metcash Limited (ASX: MTS), accounting software group MYOB Group Ltd (ASX: MYO), gold miner Regis Resources Limited (ASX: RRL), shopping centre operator Scentre Group (ASX: SCG), property developer Stockland Corporation Ltd (ASX: SGP) and supermarket giant Woolworths Limited (ASX: WOW).
These stocks have a yield of at least 4.5% and have managed to grow their EPS over the past year. The broker expects that this group will also be able to increase their dividends over the next year or two as well.
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