One of the most effective ways to grow your wealth is through the stockmarket. With a buy and hold investing strategy, shareholders in prominent Australian companies such as Coca-Cola Amatil Ltd (ASX: CCL), Telstra Corporation Ltd (ASX: TLS) and Woodside Petroleum Limited (ASX: WPL) have used dividend income and capital gains to make their later years more comfortable.
But can the good times continue? Here’s what you need to know about these three big dividend payers.
Within the S&P/ASX 200 (ASX: XJO) (^AXJO) Telstra pays one of the biggest and most consistent dividends. It has been able to do so thanks to its huge profit margins and ongoing dominance in the Australian mobile and fixed internet markets.
Recently, management have signed off on a number of divestments which will enable the company to have up to $7 billion of cash at its disposal by the end of the year. This is increasing the likelihood of further dividend increases to the company’s current 5.3% yield.
With an ambition to continue growing earnings from Asia, ongoing payments from the NBN Co and more balance sheet flexibility, it’s easy to see why investors are buying up Telstra shares.
Following a 25% fall in its share price over the past 12 months, CCA seems to have finally reached a bottom. Despite having a fabulous track record as the exclusive supplier of products such as Coca-Cola, Sprite, Mt Franklin and alcoholic beverages such as Jim Beam and Canadian Club, the market recently became concerned about short-term headwinds such as a price war with rival Schweppes, a high AUD and wage inflation throughout Indonesia.
Now with a forecast dividend yield of 4.6% and a cheaper share price, CCA stands out as a great buy for long-term investors.
Woodside is Australia’s largest independent oil and gas company with key projects off the coast of Western Australia. Over the years, Woodside has created a proud history with its shareholders by taking on big and lucrative long-term projects.
The company’s recent decision to withdraw from the huge Leviathan project off the coast of Israel has been happily received by the market. However it now leaves Woodside with a growing cash balance and only one large project in the pipeline, Browse FLNG.
Woodside will be looking to grow its exploration spend in coming years, particularly in places such as the Porcupine Basin (off the coast of Ireland) and Myanmar. I believe Woodside currently trades around fair value but any significant drop in share price would give rise to a compelling long-term investment case.
A better investment than these 3
Of these three great companies, my pick of the bunch would be Coca-Cola Amatil. However it’s important to remember that when buying Australian stocks we have more to choose from than just three companies (there are over 2,000 on the stock exchange!).