MENU

3 big dividends that leave term deposits for dead

I looked at term deposits this morning to see what rates I could get on some cash that I need to squirrel away for a few months. According to comparison website finder.com.au, Citi pays a juicy 3% – if I have $250,000 that I don’t need.

Bank of Melbourne will give me 3.2%, if I lock it away for 3 years, and RaboDirect will give me 3.3%, if I lock it away for 5. Why bother? With those sorts of timeframes in mind, I could just about invest the money in shares instead.

Yes, the sharemarket could crash and no, there is no guarantee I’ll get my money back when I want it. There is a definite place for term deposits in the market – but fact is, dividends leave them for dead. Here are 3 companies whose dividends smash term deposits right now:

National Australia Bank Ltd. (ASX: NAB) – yields 6% fully franked

Most readers will be familiar with National Australia Bank, whose shares have been left behind in the recent run-up in bank prices. It pays the biggest dividend of the ‘Big 4’ banks and is one of the cheapest in Price to Book (P/B) terms.

Dicker Data Ltd (ASX: DDR) – yields 6.7% fully franked

This computer software and hardware distributor has been growing at a respectable clip over the last few years and aims to pay 100% of its profit as dividends, hence the big yield. That does leave the dividend highly vulnerable to any business downturns, but you can’t knock 6.7% fully franked.

Telstra Corporation Ltd (ASX: TLS) – yields 7.5% fully franked

Broadband and mobile business Telstra Corporation makes a lot of money from society’s growing fixation with mobile devices and the internet, while its plunging share price (due to fears of competition and falling profits) have seen its dividend balloon out to 7.5%, with franking credits on top.

Foolish Takeaway

As well as additional risks, there are 2 main advantages to dividends over a term deposit:

1) They are attached to companies which can grow earnings and dividends (and the share price), and

2) They come with franking credits attached. Fully franked companies confer a tax benefit on many shareholders that can result in a big boost to the effective dividend yield.

Here are 3 strong businesses with fully franked dividends our analysts are recommending right now:

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks means stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

The contrast to these "new breed" blue chips couldn't be greater... especially the very real prospect of significant share price gains, something that's looking less likely from the usual blue chip suspects.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.