As term deposit rates fall, investors scramble for solid dividend-paying shares. It’s a phenomenon that seems to be driving up the shares prices — and sometimes, perversely, lowering the yields — of Aussie blue chips from Wesfarmers (ASX: WES) to Woolworths (ASX: WOW).
Beyond such blue chips are a number of smaller companies with equally tempting yields and perhaps greater growth prospects or better value. Here are two such ideas — including one company paying a fully franked 6.8% yield!
Idea #1: Premier Investments
Premier Investments (ASX: PMV) is an operator of specialty retail chains, including Just Jeans, Smiggle and Jay Jays, among others, which has a market cap of $1.3 billion. For the first half of 2013, the company reported net profits after tax up nearly 21% to $46.5 million. Online sales grew 50% over the same period, and the company also reported promising growth from its “fast fashion” chains Dotti and Portmans.
Premier Investments shares don’t appear cheap, exactly, trading at a P/E ratio of just over 17. Yet on EV to EBITDA basis, which accounts for the company’s strong cash position and low debt, the valuation looks somewhat more reasonable, at around 8.4.
Finally, Premier Investments boasts a high payout ratio (meaning it returns a good portion of profits to shareholders) and pays a fully franked dividend with a yield currently in the 4.3% range.
Idea #2: Oroton Group
Sydney-based distributor and retailer Oroton Group (ASX: ORL) owns one of Australia’s most recognisable brands — its classic leather bags have proven to be enduringly popular.
Following the end of its licensing deal with American fashion label Ralph Lauren, Oroton is seeking growth by opening stores in Asia, including in Hong Kong, Singapore and Malaysia, as well as in the Middle East.
Today, the company has $5 million in cash and no debt, and shares trade for just under 12 times earnings. With a fully franked dividend yield currently in the 6.8% range, Oroton shares could be one for an income-oriented investor’s watch list.
In the market for high yielding ASX shares? You can get more three promising ideas right now in our special FREE report, “3 Stocks for the Great Dividend Boom.” Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!
- Near a 52-week high, these shares could still be a BUY
- ANZ’s 4.9% dividend yield: Tempting, but worth the risk?
Motley Fool contributor Catherine Baab-Muguira has no financial interest in any of the companies mentioned in this article. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th