Australia and New Zealand Banking Group (ASX: ANZ), Telstra Corporation Ltd (ASX: TLS) and Insurance Australia Group Ltd (ASX: IAG) offer spectacular dividend yields.
What's more, over the past year their share prices are up 13.5%, 14.8% and 12.4%, respectively. Thus offering capital gains potential and a tax effective income stream, all in one. However, over the past decade, only ANZ's share price has actually beaten the broader market that is the S&P/ASX 200 (INDEXASX: XJO).
As the owner of popular insurance brands such as a NRMA, SGIO, CGU and Swann Insurance, IAG has the ability to post strong results when nature chooses to allow it. With few natural disasters and after ridding itself of its failed UK exposure in 2013, IAG was able to post a very strong profit result in FY14. Insurance profit jumped 10.6% and its insurance margin increased to 18.3%, a level many of its rivals would envy. It boasts a dividend yield of 6% fully franked.
Telstra also posted a solid set of FY14 results with net profit climbing 14.6% year-on-year and a final dividend of 15 cents, taking its full-year payout to 29.5 cents and placing the stock on a fully franked yield of 5.3%. In coming years analysts are expecting earnings per share to jump as a result of increased revenue from the telco's International division as well as strong growth in the Network Application Services division.
Lastly, ANZ may have underperformed its larger banking peers in the past decade but in coming years it's likely to move into a league of its own. Thanks to its 'Super Regional Strategy' showing good momentum in the first half of FY14. Furthermore, the long-term benefits derived from the bank's move into Asia will likely begin to show through in coming years.
Domestically, the bank continues to experience above system growth in mortgages and has taken strides to increase its business banking exposure. In the upcoming full-year report (due out at the end of October) it is expected the bank will increase its full-year dividend to 176 cents per share. This will put it on a forecast dividend yield of 5.28% fully franked.
Buy, Hold or Sell?
All of these companies are well run and have a number of long-term growth prospects. However, their future potential appears to be fully reflected in their current share prices and I'd rather wait for a lower entry point before buying in.
