When it comes to seeking out stocks to add to your portfolio that will boost your income it's vitally important that you consider the future dividend payments you expect to receive not what has been received in the past.
For example, in financial year (FY) 2013 grocery wholesaler Metcash Limited (ASX: MTS) paid dividends totalling 28 cents per share (cps), however the total dividend to be paid in FY 2014 – according to one consensus of analysts surveyed – is forecast to be just 17.1 cps. Even more alarming for Metcash's shareholders, the dividend is forecast to fall even further in FY 2015 to just 13.5 cps. As you can see, using last year's dividend will give you anything but an accurate forecast of the likely future yield.
For the reason cited above, when identifying income stocks investors should focus on stocks which firstly – have a maintainable current dividend and secondly – that are forecast to grow both their earnings and dividends in future years.
Here are three companies with large capitalisations that should meet both requirements – an ability to maintain their current dividends and also to increase them in the future. Importantly, they also all pay fully franked dividends.
National Australia Bank Ltd. (ASX: NAB) is still the most appealing of the major banks, with a forecast FY 2015 yield of 6.4%. NAB remains the highest yielding of the 'Big 4' with Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) neck-and-neck in second spot with yields of 5.5% each.
Telstra Corporation Ltd (ASX: TLS) remains a perennial favourite amongst income-seeking investors due to the rock solid maintainability of its dividend. Currently the stock is trading on an FY 2015 yield of 5.4%.
Tabcorp Holdings Limited (ASX: TAH) is a provider of gambling services including wagering, gaming and Keno in most Australian states. Overall the company enjoys a highly consistent stream of revenues and earnings which in turn allow for a steady stream of dividends. A rising population and rising per capita income should see Tabcorp continue to grow its dividend in the future.
