With the ASX having delivered capital gains of just 3% since the turn of the year, many investors are understandably searching for higher yield stocks.
Furthermore, with the RBA seemingly willing to reduce interest rates further, dividends could become an even more important part of Aussie investors' total returns.
So, with that in mind, here are three stocks with strong income prospects and tax effective fully franked dividends.
Santos Ltd
Although it currently yields just 2.7%, Santos Ltd (ASX: STO) is on the cusp of strong profitability growth. Indeed, the oil and gas producer is expected to increase its bottom line at an annualised rate of around a third over the next two years, which is set to allow it the scope to increase dividends at an equally rapid rate.
Therefore with dividends per share forecast to be around 77% higher in FY 2015 than they were in FY 2013, Santos could be yielding as much as 4.1% next year. This means that Santos could prove to be a very valuable income play – especially if the ASX's performance continues to disappoint.
Telstra Corporation
It's a slightly different story at Telstra Corporation Ltd (ASX: TLS), since the Aussie mobile provider is expected to deliver next to no dividend growth over the next couple of years. Indeed, dividends are expected to rise by just 1.7% this year and deliver zero growth next year as the company seeks to reinvigorate its bottom line via expansion into Asian markets.
However, where Telstra could add value to your portfolio as an income play is in terms of its present yield. It currently stands at a whopping 5.3%. This is well ahead of inflation and above and beyond the RBA's current interest rate of 2.5%.
Commonwealth Bank of Australia
While Santos offers exceptional dividend growth potential and Telstra has a top notch yield, Commonwealth Bank of Australia (ASX: CBA) seems to have the best of both. That's because it has a yield of 5.1%, which is backed up by impressive dividend growth forecasts for the next two years.
For instance, dividends per share are expected to rise by 5.2% in the current year, and by a further 5.1% next year. Assuming no change in its share price, this means that CBA could be yielding as much as 5.5% in FY 2016.
The effect of such an impressive yield on investor sentiment could, of course, be hugely positive and has the potential to prompt share price growth in addition to a lucrative income return.
