If you're struggling to find a suitable return on your wealth, you're not alone.
The nation's cash rate is stuck at just 2 per cent, as decided by the Reserve Bank of Australia earlier this week, and doesn't look like climbing anytime soon.
In fact, some analysts believe the cash rate will fall to 1.5 per cent next year, while many analysts will tell you the Reserve Bank won't even consider increasing it until the year after. Even that I'm not so sure of.
A visit to one bank's website shows that individuals could earn a 3.2 per cent annualised return on their investment over six months.
That's not bad when you consider that others are offering closer to 2 per cent, although it's hardly life-changing either. Especially when you consider that any returns could incur taxes, while inflation is also eating away at the end result.
While lower interest rates are obviously great for families trying to pay off their mortgages, or put their kids through schooling, it's clear they're not so great for those people who need that interest income to live off.
One way to combat this low interest rate environment is to invest some of your hard-earned cash in some of Australia's top dividend-paying companies. Although many people would consider this a risky strategy, that risk can be mitigated by focusing your attention only on the country's most reputable businesses offering solid dividends.
Here are five you might consider…
- Telstra Corporation Ltd (ASX: TLS) is Australia's largest telecommunications business, which enjoys solid margins (that is, it keeps a lot of the money it brings in), a strong cash-flow and offers a great dividend. At its current price of $5.66, it offers a 5.4 per cent fully franked dividend, or 7.7 per cent when grossed up for franking credits.
- Woolworths Limited (ASX: WOW) has posted a difficult 12 months, but in my opinion is still a reasonable investment prospect for investors focused on the long term. It's paying a $1.39 per share dividend, which equates to a fully franked yield of 5.3 per cent.
- Westfield Corp Ltd (ASX: WFD) owns and operates Westfield-branded shopping centres in the United States and United Kingdom. Not only should it benefit from their recovering economies, it also quotes its dividends in US dollars. That's great for Australian investors who profit from the weaker exchange rate. Westfield Corp is trading on a trailing 4.5 per cent dividend yield.
- Scentre Group Ltd (ASX: SCG), on the other hand, owns and operates Westfield-branded stores in Australia and New Zealand, and could also be a great dividend stock to consider. According to its recent earnings release, the company owns 14 of the top 20 shopping centres in Australia (measured by sales), and will continue to focus on improving its best assets. The shares offer a 5.1 per cent dividend yield, albeit unfranked.
- Wesfarmers Ltd (ASX: WES) is another blue-chip corporation to consider adding to your portfolio for superior dividend returns. The company owns businesses such as Coles, Kmart and Bunnings Warehouse, so won't be going anywhere anytime soon. At $40.26 per share, the company offers a 5.6 per cent fully franked dividend, grossed to 8 per cent.
Investing in the stock market isn't without its risks, but by investing only in strong companies that have shown their ability to survive even the toughest economic conditions those risks can be somewhat alleviated.
Each of the five companies mentioned above seem suitable in this regard, and could be considered to help strengthen your income stream in this low interest rate environment.
