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Worried about the miners? Try these 3 stocks instead

According to The Australian our resources sector is set to post results reminiscent of the GFC and drag down earnings this reporting season.

The markets consensus is that companies in the sector will drop earnings per share by around 25%. However, there is some relief for investors, with industrials set to continue their upbeat performance with expectations that EPS will grow 5% on average — their best performance since the GFC.

A shift of focus from growth to cost-cutting has enabled companies in the sector to become more efficient and return to shareholders as well as support modest growth. Although Australian industrials are selling at slightly higher earnings multiples (13.8) than their overseas counterparts, they are still lower than their long-term average of 14.3.

With confession season behind us, investors aren’t expecting too many surprises in August. However with lower commodity prices looming over resources stocks, investors may be left wondering how they can avoid the sector but still get a hold of some good stocks. Here are three high-yielding stocks to take advantage of this reporting season.

Telstra (ASX: TLS) is set to reap the benefits of a boom in downloads and mobile internet activity by using its competitive advantage over its rivals. Despite subscribers’ inevitable shift away from its old lucrative copper network, Telstra will continue to improve margins on its new businesses and draw away from its smaller rivals with its customer service and reliability. Paying a 5.5% fully franked dividend (that could increase in the next two years) investors could do worse than add Telstra to their portfolios.

Two other stocks with great dividends that have been avoided by Mr Market are Myer (ASX: MYR) and Metcash (ASX: MTS). Both companies represent good value, currently trading on modest earnings multiples and Metcash’s 7.9% fully franked dividend is one of the best on the market.

Foolish takeaway

Resources stocks like BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG) are facing uncertain times in the short and medium term and investors should take care before making the decision to invest. The market is offering up other, more stable and higher yielding stocks, that don’t carry the same amount of uncertainty or risk.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

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Motley Fool contributor Owen Raszkiewicz owns shares in Metcash and Myer.

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