Interest rates are just 1.75%… and many expect them to go lower.
That means the returns from term deposits, government bonds, and savings accounts are dismal.
By contrast, thanks to a lower Australian dollar and robust balance sheets, the dividend yields from shares in some growing companies included in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) look very compelling.
Here are three income shares to watch in 2016:
- Westfield Corp (ASX: WFD)
Westfield Corp is the global arm of the shopping centre giant. With a lower Australian dollar and leverage to a rebounding US consumer, Westfield Corp is ideally situated to benefit from some tailwinds. It's forecast to a pay a dividend equivalent to 3.2%.
- Altium Limited (ASX: ALU)
Altium's share price has ran hard in recent times, up 40% in six months, but for the long-term-focused investor, there are plenty of reasons to get excited by this company. In addition to having plenty of cash on its balance sheet and paying a 2.8% dividend, Altium has growing overseas operations and a good product. As a software developer, its revenue is also quite sticky.
- Retail Food Group Limited (ASX: RFG)
Retail Food Group is perhaps the most fickle of these three businesses and priced most fairly. The owner of Donut King, Pizza Capers, Gloria Jean's and more, also has international operations but is – to an extent – in tune with the local economy. Of course, you or I probably wouldn't stop drinking coffee in a market downturn, but the perception of weakness is there, so long-term investors should expect good times and bad. Still, its 4.2% fully franked dividend is tempting.
In this low-interest rate environment, each of these businesses appears worthy of closer inspection.
