The Reserve Bank of Australia's decision to keep interest rates on hold yesterday means blue chip dividend stocks will continue to be the hottest investments in town, at least a little while longer.
And it's no wonder why. With the S&P/ASX 200 (INDEXASX: XJO) up a whopping 30% in the past 24 months, investors have been well rewarded for making the switch from term deposits and savings accounts.
However the dramatic rise has prompted some analysts to suggest the market may have already made its biggest gains and a correction could be just around the corner.
Coca-Cola Amatil Ltd (ASX: CCL), Telstra Corporation Ltd (ASX: TLS) and National Australia Bank Ltd. (ASX: NAB) are three companies which investors seek out as alternatives to low interest rates. But should you?
Coca-Cola Amatil, the distributor of The Coca-Cola Company's range of products, has had a turbulent five years on the ASX, with shares down 8%. However with a new CEO in place, shareholders will be hoping Alison Watkins can return the company to sustainable earnings growth in the coming years. Shares are down 24% in 2014 alone. Today's price could present an excellent buying opportunity, but investors should consider the possibility of a volatile share price in the short term as management undertake its strategic review.
Telstra Corporation, on the other hand, has smashed the market's return; rising an incredible 87% in the past three years. However despite shares offering a 5.3% fully franked dividend, it seems the days of a bargain buying opportunity are behind it.
Lastly, NAB shareholders have also enjoyed a healthy run-up in value over the past three years, up over 50% not including dividends. However NAB is facing a number of uncertainties in its troubled UK Banking division, including a Scottish independence vote later in the month. Until NAB can completely remove itself from the UK or at least significantly reduce its exposure, the potential returns do not justify the uncertainties involved.
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