While many investors have been chasing the four major banks and Telstra (ASX: TLS) for their 5%-plus dividend yields, there are other companies in the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) that offer even more enticing yields.
As Warren Buffett likes to say, "Price is what you pay but value is what you get." There is nearly always a trade off in investing between paying a high price for high quality but potentially little value, and paying a low price for low quality but potentially huge value. These are the two extremes with most investment decisions falling somewhere in between. Currently many investors appear willing to pay almost any price for the banks and Telstra, partially because of perceived safety and surety of the dividend.
It would appear that the "M's" have it!
Three companies that are all members of the ASX 200 index that at today's prices are yielding more than the banks, based on forward estimates by Goldman Sachs are Metcash (ASX: MTS), Mondelphous Group (ASX: MND) and Myer (ASX: MYR).
With a forecast dividend of 27 cents per share (cps), Metcash is currently trading on a yield of 6.9%. This is pretty enticing considering management's push into utilising its wholesaling and franchising experience in new channels coupled with the company's successful positioning in the convenience supermarket space.
Mondelphous is expected to pay 149 cents per share in dividends over the next 12 months, placing it on a yield of 9.35%. This high yield is largely a result of a significant fall in the company's share price due to the bleak outlook for mining services. There will be buying opportunities in the aftermath of the resource boom but investors need to tread carefully as it could be too soon to wade in yet.
Last but not least, department store Myer is forecast to pay a total of 17.5 cps in dividends, placing the company on a 7% yield. Admittedly times are still tough for retailers, however with much of the bad news now baked in to the share price, it is possible investors might be getting well paid while they wait for Myer's earnings to improve.
Foolish takeaway
If a dividend yield looks too good to be true, then it probably is! This could be the case with Mondelphous, with future dividend expectations perhaps being too bullish given the deteriorating outlook. However, the market also has a habit of 'throwing the baby out with the bath water', so it can be worth taking a closer look when a decent business gets knocked about.
Sifting through the market for high yielding ASX shares? Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!
More reading
Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
