The Australian share market has fallen over 6% from its early-September high and was down another 0.4% on Monday. While that's bad news for shareholders, it's good news for those with a bit of cash on the side ready to invest for the long term.
Big Opportunities
The pullback in the market has opened opportunities for income-focussed investors to pick up big dividend-paying companies at a discount to their recent trading range. Here are seven companies that are predicted to deliver massive yields in 2015, in fact five of them have estimated yields over 8% when grossed-up for franking credits:
- Insurance Australia Group Ltd (ASX: IAG), 5.6% yield, 100% franked, 8% gross income
- National Australia Bank Ltd. (ASX: NAB), 6.3% yield, 100% franked, 9.1% gross income
- Coca-Cola Amatil Ltd (ASX: CCL), 5.3% yield, 75% franked, 7% gross income
- Woodside Petroleum Limited (ASX: WPL), 5.7% yield, 100% franked, 8.2% gross income
- Myer Holdings Ltd (ASX: MYR), 7.3% yield, 100% franked, 10.5% gross income
- Australia and New Zealand Banking Group (ASX: ANZ), 5.9% yield, 100% franked, 8.4% gross income
- Sydney Airport Limited (ASX: SYD), 5.8% yield, 0% franking, 5.8% gross income
The figures above are mean analysts' estimates for the 2015 financial year dividends per share and assume a constant share price.
Quality is Pivotal
The most important points to consider about the companies listed above are their ability to maintain their dividend payout and the likelihood of whether or not the company could be materially worse off in the future.
Investing in riskier companies could result in a capital loss that is unlikely to be offset by income payments over the long term.
For example, some investors may consider Myer and Coca-Cola's futures as too uncertain at this stage, while IAG's profitability and thus ability to maintain a solid dividend is largely determined by factors outside its control. Similarly, Woodside cannot exert meaningful control over the price that it sells its oil and gas at, and the banks' profitability is partly leveraged to the growth of the domestic economy and local housing market.
Every decision made on the share market must be made with a risk vs return mentality.
