As the first full week of trading for 2014 comes to an end, investors have experienced a lacklustre start to the year, with the S&P/ASX 100 Index (Index: ^AXTO) (ASX: XTO) falling around 0.8%.
The lack of news flow has left many investors treading water as they wait for the all-important reporting season to kick off in February. This 'quiet' time offers a great opportunity for investors to catch-up on reviewing stocks that they want to investigate. I've taken the time to review a number of stocks within the S&P/ ASX 100 Index to identify a stock for investors seeking out income.
Amongst the ASX 100 there are a number of stocks which have appealing historic dividend yields. These firms include Metcash (ASX: MTS) and Monadelphous (ASX: MND), which both trade on around 8%. However both firms are also forecast to pay lower dividends in financial year (FY) 2014, which means their forecast dividend yields are lower than their historic yields. Other stocks within the top 100 also offer enticing yields but those yields must be balanced with the outlook for the company's earnings and the current valuation of the stock.
This has led me to leading investment bank Macquarie Group (ASX: MQG). Macquarie is forecast to boost earnings and dividends in FY 2014. Based on consensus forecasts, Macquarie will pay a full-year dividend of 286.6 cents per share; with the stock currently trading around $53.50 that equates to a forecast dividend yield of 5.35%. What's more, looking out to FY 2015 that yield increases to 5.6%, thanks to a forecast 12% increase in the dividend.
Foolish takeaway
Importantly from a valuation perspective, Macquarie is trading on a forecast price-to-earnings (PE) ratio of 14.9. While this isn't cheap for a firm with the leverage of Macquarie, given the depressed earnings being experienced by the firm as a result of the tough capital and equity markets at present, this multiple gets more appealing as investors look further ahead to forecast earnings growth. The PE multiple is also forecast to fall to 13.1 times FY 2015 earnings.
