Blue-chip stocks continue to enjoy their time in the sun as investors remain focussed on achieving a level of income from equities above that which they would otherwise receive if they kept their savings in a high interest deposit account. It's completely understandable – if you're retired and trying to live off of your savings – the approximate 3.3% before tax that you'll earn from the bank just isn't going to cut it.
If you're looking to beat the banks and want to stick to the blue-chips, there are a number of stocks offering appealing yields at present but some are better than others.
Woolworths Limited (ASX: WOW) paid a total dividend of 137 cents per share (cps) in financial year (FY) 2014 and according to Morningstar's consensus data its dividend is forecast to increase to 145 cps in FY 2015. With the stock closing on Thursday at $35.30, this implies that investors buying stock today could attain a fully franked yield of 4.1%.
For the year ending 30 June 2014 Wesfarmers Ltd (ASX: WES) has declared total ordinary dividends of 190 cps plus the company has also declared a special dividend of 10 cps and proposed a $1 per share distribution as a form of capital management. Consensus has the FY 2015 dividend forecast at 220 cps which suggests the conglomerate is trading on a forecast fully franked yield of 5%.
Meanwhile, leading wealth services provider AMP Limited (ASX: AMP) operates on a calendar year basis. For the first half the group has declared an interim dividend of 12.5 cps, with analysts forecasting a full year dividend totalling 26 cps. With the group's operations looking to have stabilised after some recent troubles within its insurance division, consensus expectations are currently for the dividend to increase to 28.5 cps in FY 2015. Based on the FY 2014 forecast, the stock is trading on a partially franked yield of 4.6%.
And the winner is Wesfarmers
Not only is Wesfarmers trading on the highest forecast dividend yield but its dividend is also fully franked and shareholders can expect to receive a capital return as well. Most importantly, the group also has plenty of earnings growth potential ahead of it which ultimately means there is the potential for meaningfully higher dividend payments in the future too.
