From experience, I know the stock market is a great vehicle for compounding personal wealth over the long-term.
In the 30 years to June 30, 2014, Vanguard's 'Australian Shares' fund achieved an average annual return of 11.7%, turning $10,000 into over $270,000!
When the average dividend yield of stocks in the S&P/ASX 200 (ASX: XJO) (INDEX: ^AXJO) is 4.6%, you can imagine my anguish when I recently locked in a term deposit which had an interest rate of just 3.5%pa.
Alas, it's prudent to have some cash safe for emergencies.
However for individuals who believe they are unlikely to call upon a sum of money for more than five years, the sharemarket should be the place you put it to work.
Indeed blue chips Telstra Corporation Ltd (ASX: TLS) and National Australia Bank Ltd (ASX: NAB) are expected to yield dividends equivalent to 5% and 6.2%, respectively. Whilst they mightn't be bargains at today's prices, they need only achieve a 7.2% average annual total shareholder return (TSR) (dividends plus capital gains) over the next 10 years, to double in value. Provided dividends were reinvested.
Growing retail bank, Bank of Queensland Limited (ASX: BOQ) and general insurance heavyweight Insurance Australia Group Ltd (ASX: IAG) are both forecast to pay a fully franked dividends of 6.1% in 2015. Grossed-up that's a yield over 8.5%!
One smaller dividend stock to consider is Ardent Leisure Group (ASX: AAD), the owner of theme parks such as Dreamworld and White Water World, AMF and Kingpin Bowling and much more. At today's price, it's expected to yields 5.5% (although unfranked).
Our #1 dividend stock for 2015 – Yours FREE!
Fixed income securities like bonds and safer assets like term deposits should make up the bulk of risk-averse investors portfolios. But for those willing to take on a little extra risk and are prepared to invest for the long-term, right now seems a better time than ever to buy some big dividend stocks. And our top investment advisors have recently identified one dividend stock with outstanding potential…
