Beat the banks with these 4 stocks

According to the National Australia Bank Ltd’s (ASX: NAB) website, savers can currently receive 4.5% from a 60-month term deposit. It’s certainly a lot better rate than savers in other parts of the world, such as the USA, are enjoying at present. But for investors who wish to benefit from franking credits and the opportunity for capital and dividend growth then the sharemarket has obvious appeal.

Here are four stocks that are all constituents of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), which pay fully franked dividends, and based on analyst consensus data provided by Morningstar Research are trading on forecast dividend yields above 4.5%.

1) SMS Management & Technology Limited  (ASX: SMX) is a provider of IT services. The company is forecast to pay dividends totalling 20 cents per share (cps) in the current financial year. Based on its recent share price of $4.10, the stock is trading on a forecast dividend yield of 4.88%.

2) Upmarket department store David Jones Limited (ASX: DJS) is forecast to declare a slightly lower full-year dividend of 16.2 cps. With its share price at $3.04 recently, the stock trades on a yield of 5.33%.

3) Tabcorp Holdings Limited (ASX: TAH) is best known for its TAB betting outlets. Assuming the company pays forecast dividends totalling 16 cps, at a share price of $3.51, the implied yield is 4.56%.

4) Tatts Group Limited (ASX: TTS) provides gambling services including the Powerball lottery. With a forecast dividend of 15 cps and a share price at $3.01, the stock is priced on a yield of 4.98%.

Foolish takeaway

The rally in stocks has significantly narrowed the gap between the interest available from a deposit account and the dividend yield available from stocks. This situation makes it all the more important that investors focus on companies which can grow both their dividends and earnings.

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Motley Fool contributor Tim McArthur owns shares in SMS Management & Technology.

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