Now more than ever, Australian investors need to be smart with their money.
That's because our economy is struggling.
It's evident with the historically low interest rates and a rising unemployment rate.
But it's not all doom and gloom.
In fact, with a little bit of common sense, local investors can position themselves to benefit from the trends at play.
For example to rebuff the lacklustre returns from term deposits and savings accounts, Australian investors can buy stocks with big dividends. In addition, we can invest in companies which are experiencing growth from their overseas exposure. Here are three stocks to consider.
1. Australian and New Zealand Banking Group (ASX: ANZ). Whilst I'm not prepared to call it a 'buy' at today's prices, every investor should have ANZ firmly fixed on their watchlist, for when prices do fall. Unlike the other major banks, ANZ has a rapidly growing international arm focused on Asia. In FY14 it derived 24% of group revenue from Asia, the Pacific, Europe and Americas. ANZ is forecast to pay a dividend equivalent to a yield of 5.7% in the next year.
2. Macquarie Group Ltd (ASX: MQG) is another Australian bank taking the world by storm. Macquarie has deep expertise in and exposure to capital markets throughout Asia, North America and Europe. However it also boasts steadily growing annuity-style businesses which will help it better withstand a downturn in global financial markets. It derives 65% of income outside Australia and New Zealand and is forecast to pay a dividend equivalent to 5%.
3. Retail Food Group Limited (ASX: RFG) is the owner and franchisor of names such as Donut King, Pizza Capers, Brumby's Bakery and much more. Recently, the group announced a proposed acquisition of coffee chain Gloria Jeans (which complements its existing exposure to the industry) and its share price has popped over 20%. Perhaps what excited investors the most was the potential for international expansion. Gloria Jeans has 358 stores in 40 international markets. In the next year, Retail Food Group is expected to pay a fully franked dividend of 4%.
Buy, Hold, or Sell?
I think investors could do a lot worse than add Retail Food Group or Macquarie Group to their portfolio. However it's important to consider Macquarie's earnings can be dramatically cyclical (given its exposure to financial markets), so long-term investors must be prepared for periods of extended volatility. Despite this, it is a well run conservative investment bank. Lastly, ANZ is probably best left on your watchlist until we see a price much lower than today's.
