With a greater number of economists and forecasters now predicting a fall in interest rates in 2015, things could be about to get a whole lot tougher for savers and income-seeking investors.
After all, a glance at Europe and the US shows that rates could (in theory) move down all the way to near-zero, which would give cash a negative return in real terms.
However, there could be a relatively simple solution: high yield stocks. Certainly, there’s more to investing than simply picking out the top dividend-paying shares, but stocks that pay a fat yield could gain in popularity in 2015, thereby leading to an improved share price performance.
With that in mind, here are three top income plays that could help you to overcome low interest rates in 2015.
Having increased dividends per share by 12.5% per annum over the last five years, it’s safe to say that Wesfarmers Ltd (ASX: WES) has a strong recent track record when it comes to shareholder payouts. Furthermore, the retailer is expected to increase dividends by 5% in the current year, which means that it has a forward yield of just over 5% at its current share price.
Certainly, the outlook for retailers such as Wesfarmers is somewhat mixed, with Aldi and Costco being threats to the status quo, while a low interest rate environment could help to spur higher levels of consumer spending.
However, with such impressive income prospects, Wesfarmers could prove to be a highly popular stock in 2015, which may cause its share price to strengthen over the coming year.
Australia and New Zealand Banking Group
Also delivering excellent dividend per share growth over the last five years has been Australia and New Zealand Banking Group (ASX: ANZ), with its shareholder payouts increasing by 11.8% per annum over the period. Although shares in ANZ have risen by 46% during the period, they still yield a mightily impressive (and fully franked) 5.7%, which could hold significant appeal for income-seeking investors in 2015.
Furthermore, ANZ could prove to be a major beneficiary of low interest rates. That’s because it could help to reduce the number of bad loans, while stimulating demand for new loans. Therefore, 2015 could prove to be a relatively prosperous year for the bank.
And, with ANZ’s dividends being covered 1.4 times by profit, it seems to offer a potent mix of a fat, sustainable yield, and strong profitability outlook.
Australia’s monopoly toll road operator, Transurban Group (ASX: TCL), also has a lot to offer income-seeking investors in 2015. Unlike many other ASX stocks, its revenue stream is consistent and reliable, which means that it can afford to be relatively generous when it comes to making dividend payments to shareholders.
For example, Transurban has increased dividends per share by 10.1% per annum over the last five years, and is forecast to raise them at a similar pace over the next two years. This means that Transurban is all set to yield 4.6% in 2015 which, although only partially franked, could help to stimulate demand for the company’s shares.
With shares in Transurban having risen by 26% during the course of 2014, they could prove to be even more popular next year – especially if interest rates do begin to tumble.
Despite this, there is another ASX company that I think could prove to be an even more appealing income play in 2015.
In fact, the analysts at The Motley Fool have recently named it as their Top Income Stock For 2015 due to its fat, fully franked yield, stunning dividend growth potential, and super-low valuation.
You can find out all about it by clicking here – it’s completely free and without obligation to do so.
Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.