Finding great stocks is hard work. Especially when you're new to the market.
If you're contemplating entering the stock market in 2014 most likely you'll want dividends, growth and low amounts of volatility. That's what every investor hopes for, but reality can be different.
It's important to understand that no stock has a guaranteed rate of return nor is any portfolio risk free simply by boasting some of the biggest names on an exchange. Another important lesson for new market entrants is simple: Stock market investing is a long-term pursuit. A marathon, not a sprint. Just ask those who bought stocks prior to the GFC then sold out to miss the subsequent rally.
Entering the market is daunting and many don't know where to start. Here are five established Australian companies to add to your watchlist.
In the resources sector, Santos Limited (ASX: STO) is a solid growth and income play. It is involved in oil and gas production and will seek to tap into energy shortages in Australia and Asia in the coming decade. It currently yields 2.1% fully franked.
Transurban Group (ASX: TCL) is the owner and operator of a number of toll roads in Australia and the United States. Although the stock doesn't come cheap, earnings are expected to grow significantly in coming years. With high barriers to entry and ongoing demand for its services, Transurban's dividend is one of the most stable on the market. It currently yields 4.8% fully franked.
Another core stock which is renowned for safety and consistent income is Washington H Soul Pattinson (ASX: SOL), or WHSP. Under management it holds a number of interests in other listed stocks including TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and Ruralco Holdings Ltd (ASX: RHL). WHSP is a slow but consistent earner and should be treated as such. It currently yields 3% fully franked.
Telstra Corporation Ltd (ASX: TLS) is a market darling for income investors and has recently amounted a huge cash pile which it will may return to shareholders through dividends or make further acquisitions. Despite its recent rally, it currently boasts a dividend of 5.4% and should be considered a 'core stock' – one which, among others, makes up a bulk of portfolio holdings.
Moving much further down the market capitalisation ladder is Ardent Leisure Group (ASX: AAD). It operates Dreamworld, Whitewater World, SkyPoint Climb, a'Albora Marinas, Goodlife fitness centres, AMF and Kingpin bowling. Earnings are expected to grow modestly in the near term as confidence returns to markets in Australia and New Zealand. It currently yields 6.2% unfranked.
Foolish takeaway
If you plan on taking money from other asset classes and moving it into the stock market it's important to remember most stock prices will rise or fall every day. It's also vital to conduct rigorous analysis on companies to put the odds in your favour and remember just because it's a big company with an attractive dividend does not mean it's an automatic buy.
