With interest rates at just 2.5%, being a saver can be frustrating at times. As a result, it may be the case that you’ve got some spare cash lying around and are wondering which shares could be worth investing in. With that in mind, here are three ASX stocks I’d buy if I had a spare $10,000.
At first glance, shares in Telstra Corporation Ltd (ASX: TLS) appear to be rather unattractive. That’s because they trade on a P/E ratio that is higher than that of the ASX (16 versus 15.3 for the wider index) and the company is forecast to deliver a fall in earnings in the current year of 12.6%.
However, delving a little deeper shows that Telstra could prove to be a top notch buy. That’s because it offers a fully franked yield of 5.1%, which is well ahead of the ASX’s yield of 4.6%, and the company is expected to bounce back with profit growth of 7.8% next year.
Furthermore, with the scope to grow its business in emerging markets across Asia and also having the relative stability that comes with being the major mobile phone operator in Australia, Telstra could have a hugely prosperous period ahead of it. As such, a premium P/E ratio seems to be worth paying.
One potential beneficiary of a low interest rate environment is shopping centres such as those owned by Scentre Group Ltd (ASX: SCG). Indeed, a low interest rate should, in theory, encourage more people to spend, thereby delivering improved numbers for retailers and shopping centres alike.
In addition, Scentre could be a great stock to own at present because it can help income investors to beat low rates via its yield, too. Although unfranked, it stands at a whopping 5.8% and, with dividends per share forecast to grow at an annualised rate of 2.4% over the next two years, it could deliver an increase in dividends in real terms, too.
Certainly, shares in Scentre aren’t cheap based on the P/E ratio of 16.4, but their income potential and scope for upbeat results could make them merit an even larger premium to the wider market moving forward.
With earnings set to grow at an annualised rate of 15.8% over the next two years, pharmaceutical stock CSL Limited (ASX: CSL) could see the share price gains of 2014 continue into next year. Indeed, shares in CSL have risen by a hugely impressive 15% year-to-date and now trade on a P/E ratio of 25.6, which is relatively rich.
However, an even larger premium could be ahead, since CSL offers a potent mix of growth potential, but also defensive qualities. For example, it has a beta of just 0.6 and with dividends per share expected to grow at an annualised rate of 15.5% over the next two years, it could become a much more attractive yield play over the medium term.
So, as with Telstra and Scentre, a premium P/E ratio does not appear to tell the whole story with CSL, and its mix of defensive and growth qualities could make it a top performer in 2015 and beyond.