Stock market traders love to come up with little ‘rules’ to guide them through the ups and downs of the market. One of those catchphrases is the adage – “Sell in May and go away.” Historical precedents and patterns often form the basis for these strategies – this one is thought to have some foundation in the Northern Hemisphere’s summer leading to lighter volumes during the holidays. According to the Stock Trader’s Almanac since 1950, the Dow Jones Index has returned an average of just 0.3% during the May-October “go away” period, compared with a 7.5% return on average for the November-April period.
While I’m not suggesting the “Sell in May and go away” adage is a strategy worth taking to heart, it is a reminder that before long winter (or summer depending on your hemisphere) will be over, November will be upon us and investors will be focused on the 2015 financial year (FY). With a view to FY 2015, the following three large companies are all trading on attractive forecast dividend yields.
The $7 billion Coca-Cola Amatil Ltd (ASX: CCL) has fallen out-of-favour with investors in recent times. While their concerns around slowing growth rates and increased competition appear justified; a forecast dividend of 51 cents per share in FY 2015 and the knocked down share price means the stock is trading on a partially franked dividend yield of 5.4%
SP AusNet (ASX: SPN) is a $4.7 billion owner and operator of electricity and gas distribution assets. With a forecast partially franked dividend of 8.6 cents per share in FY 2015, the stock is trading on a yield of 6.2%
The Australian focussed Westfield Retail Trust (ASX: WRT) provides shareholders with exposure to around 46 major shopping centres. With expectations for an unfranked dividend of 20.8 cents per share to be paid in FY 2015, the stock is trading on a forecast dividend yield of 6.5%.
While the banks certainly do offer enticing fully franked dividend yields, there are risks involved with owning banks that many investors appear to be either oblivious or indifferent to. Investors should remember that not all yields are created equally and realise that there is always a risk versus reward trade-off when investing.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
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