If you're thinking about building your financial future, the Australian share market can be a great place to start. With the ASX performing exceptionally well and interest rates at record low rates, now is the best time to grab yourself some high-yielding bargains.
For investors it is important not to fall into the so called "dividend trap", whereby investors blindly pursue high-yield stocks with poor future growth prospects. So here are three stocks that I think offer a healthy combination of both dividends and growth potential. Moreover, at current prices they seem a solid buy.
1. Australia's largest investment bank Macquarie Group Ltd (ASX: MQG) has been performing exceptionally well, returning gains to shareholders of about 40% in the past year. Given our improving global economic conditions and equity markets, Macquarie has the best opportunity to capitalise on higher demand for its services. Macquarie has also been gradually increasing its market share in the lucrative Asian financial industry, which now makes up about 13% of its income. What's more, Macquarie offers a steady 4.7% dividend yield.
2. RCG Corporation Limited (ASX: RCG) is the owner of well known brands such as The Athlete's Foot and distributor of brands such as CAR and Merrell in Australia and New Zealand. Despite the unpredictable conditions surrounding the Australian retail market, RCG Corporation has performed exceptionally well. In an industry where competitors are cutting down costs to improve margins, RCG Corporation's management has been focusing on increasing its future earnings growth.
In its most recent FY14 report, RCG Corporation grew net profit after tax by a solid 11.2%. Offering a massive 7.4% fully franked dividend yield, it seems to have the perfect combination of both growth and dividends.
3. IOOF Holdings Limited (ASX: IFL) provides financial products and portfolio administration services including investments, superannuation and annuities. Given our ageing population, superannuation and other retirement related services are expected to be in high demand as more people prepare for their retirement. Despite its large size, IOOF's growth strategy has been going exceptionally well. Its most recent acquisition of SFGA Australia Ltd was a smart one and is expected to contribute immediately to earnings in FY15. In addition to its growing business, IOOF offers a tasty 5.6% fully franked dividend yield which is perfect for compounding your retirement portfolio.
