Long-term trend lines, good management and dividends reward shareholders for committing their hard-earned cash to the market. These five stocks offer room for growth and pay good dividends.
Currently, blue-chips seem pricey. The current interest rate environment has meant that any well branded stock with a large market cap has risen in price. However, ANZ (ASX: ANZ) and Telstra (ASX: TLS) are two stocks that remain great long-term prospects. The current prices are buoyed by firm dividends of 4.9% and 5.7%, respectively. Despite modest growth trends and strong brand names, these two companies should be considered 'core' stocks and could comfortably make up the largest portions of diversified portfolios.
Looking outside the S&P/ASX 200 (ASX: XJO) (Index: ^AXJO), a number of stocks put term deposits to shame. Not only do they yield exceptionally well, they are priced to perfection. Myer (ASX: MYR) is a stock that has faced enormous headwinds since it listed back in 2009. At current prices it yields 7.2% fully franked and trades on earnings around 12. With interest rates low and overseas online purchases looking less appealing with a lower AUD, Myer is likely to get a break from the poor consumer confidence in the domestic economy.
Two stocks that are unfavourable among many investors are Leighton Holdings (ASX: LEI) and Ausdrill (ASX: ASL). Leighton pays a partial franked 5.4% dividend and trades cheap. In recent years management has dealt with very poorly run projects such as Victoria's desalination plant. However, the company has recently won many new contracts, both domestically and overseas, which has given it more earnings certainty moving past FY14.
Ausdrill is a different story. Despite earning around 34% of revenue outside Australia, the certain uncertainty of mining services in Australia and abroad has left investors at odds. However this investor is anticipating a dividend of around 13 cents fully franked, which will yield around 8.8% over the full year. Investors should acknowledge the medium-term uncertainty and allocate the stock to their portfolio accordingly.
Foolish takeaway
Investors should focus on building up a diversified portfolio over time, remembering that no stock is a buy at any price. Laying foundations with strong companies like ANZ and Telstra can help investors avoid volatility, take advantage of long term trends and pocket great dividends in the process.
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Motley Fool contributor Owen Raszkiewicz owns shares in ANZ, Leighton Holdings, Ausdrill and Myer.
