While the first Tuesday in November is best known for the Melbourne Cup horse race, it's also an important day for investors who eagerly await the Reserve Bank's latest decision on interest rates.
As it stands, the money is on the RBA leaving interest rates unchanged at their current record low of just 2.5% for another month. Extending on that, it's a popular belief amongst economists that rates will remain unchanged until at very least late 2015. Others are even suggesting another rate cut could be on the cards – particularly if the unemployment rate continues to climb and if commodity prices don't stage a recovery.
While that's not so great for retirees or other individuals with their money locked away in 'risk-free' assets, it's fantastic for consumers and mortgage borrowers, and for the economy as a whole. It's also great for high-yield dividend investors who can take advantage of potentially market-smashing returns!
However, with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) once again firing on all cylinders, investors shouldn't just back any old dividend payer. For instance, I wouldn't even consider touching the big four banks at their current price levels, even despite their lucrative dividend payments.
Instead, I'd be looking at companies like Coca-Cola Amatil Ltd (ASX: CCL), Woolworths Limited (ASX: WOW) and JB Hi-Fi Limited (ASX: JBH), which are all looking very reasonably priced today.
Coca-Cola Amatil is currently expected to pay 45.5 cents per share (cps) in FY15, which would equate to a 4.9% dividend yield (franked to 75%), while JB Hi-Fi is tipped to pay 86.9 cps in FY15, indicating a fully franked yield of 5.6% (or a grossed up yield of 8.1%).
Until recently, I considered Woolworths to be fairly pricey but its recent pullback has certainly got my attention. While it's still not a bargain buy, Woolworths is a fantastic stock for investors to hold thanks to its defensive nature and juicy dividend.
Investors seem to have been disappointed with Woolworths' growth over its first quarter – especially when compared to the results of rival Wesfarmers Ltd (ASX: WES) – but I expect this will be a short-term issue. At its current $33.52 price tag, the stock is forecast to yield a fantastic 4.3% (fully franked) in FY15.
