Higher unemployment, slowing house price growth, mining investment and consumer confidence are pointing to one thing in 2015: Lower interest rates.
In fact earlier this month, two big bank economists revised forecasts for two interest rate cuts in the next year.
That means fixed interest investments, such as term deposits and bonds, may be in for a tough year.
Meanwhile corporate earnings are likely to be a net beneficiary of lower borrowing rates.
For investors it means the Australian share market is again likely to be the best place to park extra cash. Big dividend stocks will continue to be vogue.
Three of Australia's favourite dividend stocks are Coca-Cola Amatil Ltd (ASX: CCL), Telstra Corporation Ltd (ASX: TLS) and Westpac Banking Corp (ASX: WBC).
After failing to meet profit guidance earlier in the year, Coca-Cola Amatil shares were heavily sold off. However the sell-off has provided an opportunity for both income and value investors who are focused on the long-term. Indeed in 2015 the group is forecast to pay a 4.4% partially franked dividend and a return to sustainable earnings per share growth seems likely.
Telstra, on the other hand, has been going from strength to strength. Throughout 2014 shareholders have been rewarded with a 12.5% increase in share price and a 5.6% fully franked dividend. Whilst Telstra's dividend is very reliable and the group is tipped to grow earnings over the long-term, its current valuation is a bit rich. Long-term investors should be prepared to wait for a more compelling buying opportunity.
Finally Westpac is being tipped by analysts to grow its payout to 190 cents per share in 2015. That puts it on a forecast 5.8% fully franked dividend yield. With a commanding market share in housing and personal loans, as well as keen focus on wealth management and Asia, Westpac looks to be a tempting prospect over the long-term. However at today's prices, its shares are simply too expensive to justify a buy rating.
Buy, Hold or Sell
At today's prices I think Coca-Cola Amatil is a good long-term buy. However I believe both Westpac and Telstra are fully valued, despite a generous dividend yield and a positive long-term outlook for each.
