The S&P/ASX 200 (INDEXASX: XJO) has managed to trade higher today but is down around 3.5% in the past month.
Since 2012, a market rally driven by record low interest rates, both domestically and abroad, has forced investors to go in search of blue chip stocks which pay handsome dividends. The banks, Telstra and two supermarkets giants have all been beneficiaries of investors looking for a decent return on their money.
However, some are suggesting US interest rates could rise sooner, rather than later. So investors who want exposure to a stronger American economy are busily pulling their money out of the local market, taking the AUD down along the way.
But who can blame them, the Aussie dollar has been tipped to fall for many months and many Aussie blue chip stocks are still too expensive to justify a purchase.
However a lower market will prompt some income investors to put their money to work in seemingly discounted blue chips. Three renowned dividends payers are Coca-Cola Amatil Ltd (ASX: CCL), Woolworths Limited (ASX: WOW) and National Australia Bank Ltd (ASX: NAB).
CCA is Australia's bottler and distributor of Coca-Cola and Beam branded products. Its share price has fallen around 25% this year as the group struggled to deal with competitive pressures and tough trading conditions in Indonesia – its key growth market. At current prices, CCA stock appears cheap, but investors must be content with modest growth and the possibility of a very volatile share price because turning around a $7 billion company isn't easy.
Unlike CCA, Woolies has proven to be an excellent company to buy and hold over the past decade, but, in recent years earnings growth has been harder to come by. Woolies, along with rival Wesfarmers, dominates the domestic grocery market and general retail and liquor markets through brands such as Big W and Dan Murphy's. The group's investment in Masters home improvement stores will take longer than expected to turn a profit but appears worth the wait. However, I believe shares trade around fair value at current prices because I find it hard to imagine them outperforming the broader market from here.
Lastly, NAB shares have been volatile today as investors tried to predict the outcome of the Scottish independence vote, which is currently being counted. A "Yes" vote for independence will have some effect on the bank's UK operations in terms of costs associated mostly with moving the head office of Clydesdale Bank. However, NAB's UK woes go deeper than potential Scottish independence and until it can divest away from its UK subsidiaries or pay down its portfolio of bad debts, I can't see it outperforming its Australian peers.
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