Investors searching for stocks to buy and hold into their retirement should be sure to select stocks with potential to significantly raise their dividend payouts over time. Why? Well imagine you retire with $500,000 invested in stocks which produces an annual income of $25,000. If in a decade’s time that income is not paying out much more than $25,000 you will be significantly poorer than when you retired.
However, if you carefully select stocks which have potential to payout income that rises far above inflation, you’re ability to enjoy life’s luxuries in retirement will not remain the same, it will increase. Here are five stocks on attractive valuations with yields above 4% that have potential to grow significantly over time.
SKYCITY Entertainment Group Limited-Ord (ASX: SKC) sells for $3.45 and currently yields 5.3% with forecasts for the payout to steadily increase out to 2016. Its main earner is the SkyCity casino and entertainment complex in Auckland, New Zealand. It has an exclusive license to operate the venue until 2048 and don’t be surprised if profits grow strongly on the back of fast-rising emigration, tourism and net wealth in Auckland. It also has an exclusive casino license in Adelaide and looks an excellent opportunity for those seeking a high-yielder with above average growth potential.
M2 Group Ltd (ASX: MTU) is a junior telco selling for $5.99 and offering a yield of 4% if able to payout 24 cents per share in financial-year 2014 as is expected. The company has been growing its telecommunication and broadband internet businesses organically and through acquisitions. Now diversifying into utility and insurance services if it’s able to execute its business strategy dividends should rise strongly into the future.
Platinum Asset Management Limited (ASX: PTM) is a specialist fund manager selling for $6.30 with a 4.3% dividend yield. It operates on a capital light basis compared to most of its peers, which allows it to generate high returns on equity and impressive payouts to shareholders. Dividends per share are forecast to grow out to 2016 and the business has plenty of growth potential. This is because it continues to achieve net fund inflows largely thanks to a strong reputation for investment performance and the natural tailwind of a superannuation system of forced savings.
Australia and New Zealand Banking Group (ASX: ANZ) currently sells for $33.56 and yields 5.1%. It looks the best positioned of the big banks to grow dividends into the future. Supported by a strong residential housing market and well developed growth opportunities in Asia, ANZ looks the best bank to buy on current valuations.
Iress Ltd (ASX: IRE) is an IT infrastructure business that currently sells for $8.76 on a yield of 4.3%. The company is nicely expanding its electronic data and software services to fund managers and brokers worldwide. Once the systems are integrated they are heavily relied upon and this creates sticky and recurring revenue for the company as switching from Iress’ systems would require unwanted operational upheaval and expense for a client. Growth comes organically, through further expansion overseas and new client wins. Dividends are forecast to grow steadily out to 2016.
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Motley Fool contributor Tom Richardson owns shares in M2 Group and ANZ Bank. You can find him on Twitter @tommyr345