The biggest problem when the market climbed higher was that most ASX stocks became too expensive. That was particularly the case with the nation’s high-yielding dividend stocks, which investors from all corners of the earth swooped on as a way to beat the low interest rate environment.
However, the market’s sharp downturn over the last month or so has seen a number of these stocks fall back to far more appealing prices. With some analysts suggesting the sell-off has been ‘overdone’, now could be an excellent time to capitalise on these opportunities to potentially make some huge profits in the coming years.
It should be noted that I’m not even talking about the big four banks, Telstra Corporation Ltd (ASX: TLS) or the supermarket duopoly. Instead, I’m talking about stocks that not only offer fantastic dividend yields, but ones that also have the capacity to deliver capital gains too.
One of the more appealing opportunities right now seems to be specialty discount retailer JB Hi-Fi Limited (ASX: JBH), which is currently sitting at its lowest price since June 2013. Despite strong headwinds facing the sector, JB Hi-Fi has still managed to grow revenues and earnings consistently year over year while it should continue to benefit from the rollout of its new ‘HOME’ format stores. At $15.06, it offers a tantalising 8% dividend yield, when grossed up for franking credits.
Insurance Australia Group Ltd (ASX: IAG) has also fallen in price over the last month and is offering investors an even better opportunity to stock up. Despite the company’s ability to grow revenues and earnings strongly over the coming years – thanks in large part to its acquisition of Wesfarmers Ltd’s (ASX: WES) insurance underwriting business – it is still trading on a forecast P/E ratio of just 12.3. While I believe that is quite underdone considering its future prospects, its incredible 9% grossed-up dividend is simply the icing on the cake.
Although Carsales.Com Ltd (ASX: CRZ) is normally considered to be a growth stock, it also offers a generous dividend yield to shareholders. The stock has fallen heavily over the last six weeks and is now trading at just $9.68 – a full 23% below its 52-week high. As it stands, Carsales.Com offers a grossed up 4.7% dividend yield but that is expected to grow substantially over the coming years as the company continues to expand its dominance in the market.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.
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