The Motley Fool

Medibank Private Ltd, Westpac Banking Corp and Telstra Corporation Ltd: Should you buy?

By all accounts 2015 is set to be another year characterised by low yields…

Well, that’s unless you’re in the share market.

You see whilst much of the world grapples with easy monetary policy (i.e. low interest rates), the share market receives a welcome boost from investors searching for higher returns.

Indeed a relatively flat performance from the local S&P/ASX 200 (ASX: XJO) (INDEX: ^AXJO) this year, means there could still be opportunities for investors to grab a hold of some reasonably priced dividend stocks.

Telstra Corporation Ltd (ASX: TLS), Westpac Banking Corp (ASX: WBC) and, more recently, Medibank Private Ltd (ASX: MPL) are examples of companies which spring to mind when dividends are brought up.

Here’s what you need to know about them…

Telstra is forecast to pay a dividend of 30 cents per share in 2015, placing the stock on a yield of exactly 5%, fully franked. Next to the 3% or 4% on offer from term deposits that may appear great. However at $6.00, its shares don’t come cheap and are probably best left on investors’ watchlists until we’re afforded a more compelling buying opportunity.

Westpac too is offering a big dividend yield, forecast at 5.8% fully franked. By itself the yield represents a grossed-up return of 8.3%, which is great. However with shares above fair value and little growth in the pipeline, patiently waiting on the sidelines for a lower price is likely to be a prudent way forward.

Medibank, the government’s most recent major privatisation, has performed strongly since listing on the ASX last month. Indeed retail shareholders who bought into the IPO are today sitting on gains of 15%. Looking further ahead however, unless Medibank can meet its cost and investing performance forecasts, its share price (currently trading at 21 times forecast FY16 earnings per share) could come under selling pressure. With an interim dividend of just 4.9 cents to be declared in 2015, currently the downside is likely outweighing the upside potential.

A better dividend stock idea than Medibank in 2015 – Yours FREE!

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool Contributor Owen Raszkiewicz owns shares of Medibank Private. You can follow Owen on Twitter @ASXinvest.

Related Articles...

Latest posts by Owen Raszkiewicz (see all)