You don't have to look too far to find someone warning investors that the 'Big 4' banks look fully priced. Despite those warnings many investors are still more focused on dividend yield than they are on capital growth and so the popularity of the 'Big 4' continues!
From a yield perspective it's understandable that the banks are popular. Based on research provided by Morningstar, analyst consensus is for each of the 'Big 4' to raise their dividends in the current financial year. That's impressive and more than can be said about the consensus view for a number of other stocks within the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).
Of the banking majors, National Australia Bank Ltd. (ASX: NAB), is currently trading on the highest forecast dividend yield at 5.97%. That's a high yield not just compared with other equities but also compared with other asset classes such as property and bonds.
While the sheer size of the banks makes them appealing for many risk-averse investors, for other investors there are opportunities to buy stocks trading on forecast fully franked dividend yields even higher than the major banks.
1) Myer Holdings Ltd (ASX: MYR) is forecast to pay dividends worth 16 cents per share (cps). Based on a share price of $2.65 that equates to a dividend yield of 6.04%.
2) Sigma Pharmaceutical Limited (ASX: SIP) is forecast to pay a dividend of 4 cps. At its current share price of 62 cents that implies a dividend yield of 6.45%.
3) Pacific Brands Limited (ASX: PBG) is forecast to pay a full-year dividend of 4.9 cps. With the stock currently trading at 61 cents that corresponds to a dividend yield of 8.03%.
Foolish takeaway
Of course the 'problem' with dividend yields is there is less certainty about the ultimate future payment that will be received compared with that from a fixed interest account or a bond. This creates an element of risk, where investors are forced to rely on accurate forecasts.
