It couldn't be clearer that dividend stocks will play a big role in driving the Australian share market higher in 2015.
With the Reserve Bank tipped to lower the cash rate even further from its current 2.5% level, investors will increasingly turn to high-yielding shares to generate greater income.
Indeed, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) could be set for a major rally in 2015, but I don't think it'll be the usual suspects that will deliver the biggest gains.
Sure, Telstra Corporation Ltd (ASX: TLS) or Commonwealth Bank of Australia (ASX: CBA) could continue to climb higher, but from their current prices it's difficult to see them delivering market-beating returns. Instead, it's more likely that some of the smaller or out-of-favour players will generate the greatest profits – some of which you may have never even heard of.
With that in mind, here are my top 5 favourite dividend plays for 2015 to help you achieve superior returns.
1. Woolworths Limited (ASX: WOW): While it might seem boring, this could be one of the best stocks you buy all year. Currently sitting at $30.42, the shares are trading at a 22% discount to their 52-week high and are forecast to yield 4.8% in FY15. That's a 6.8% yield, when grossed up for franking credits.
2. RCG Corporation Limited (ASX: RCG): The owner of The Athlete's Foot shoe store chain has somehow gone under the market's radar, despite its decent growth prospects and its remarkable 7.3% dividend yield, fully franked. While it has its risks, this could certainly be a market-smashing play in 2015 and beyond.
3. Coca-Cola Amatil Ltd (ASX: CCL): It's been a tough couple of years for the beverage manufacturer but there are strong signs that suggest the future could still be very bright. While strong capital gains could be on the cards in 2015, the company is also tipped to yield 4.4% in FY15, franked to 75%.
4. JB Hi-Fi Limited (ASX: JBH): The retailer's shares are trading at a 30% discount since peaking in January. While the company boasts strong growth prospects as it rolls out its new 'HOME' format stores, sales could also soar if interest rates are lowered further (acting to increase consumer confidence). The stock yields 5.5%, fully franked.
5. Lindsay Australia Limited (ASX: LAU): The market opportunities for this logistics and transport business are enormous. It continues to expand into far-north Queensland where there is enormous potential for refrigerated seafood transport to Asia. Its prospects have been strengthened as a result of the Free Trade Agreement reached between Australia and China. While it is likely the riskiest stock on this list, an investment today could pay off handsomely – particularly thanks to its trailing 5.2% fully franked dividend.
There is one more company which could be an even greater buy than any of those companies mentioned above.
