Dividend stocks are looking more attractive with online savings account interest rates slipping.
Recently, banks have been reducing their online savings account interest rates, further eroding the power to compound earnings. Weakening competition for deposit funds is one factor in bringing rates down. The other is the rising cost of offering such accounts for banks.
Among the big four banks, Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Bank Group (ASX: ANZ) have some of the best rates, according to the RateCity rates comparison website. Base rates stand at 2.5% pa, with maximum rates at 3.61% and 3.50%, respectively.
Online savings accounts may be convenient to use and offer a smidgen of higher interest, but for long-term wealth creation, they fall way short of the goal.
Foolish investors can take their monthly money savings and buy solid dividend stocks for better long-term returns. Westpac stock pays a very healthy 5.7% fully franked yield- more than double its base online savings rate. ANZ comes in even better at 5.9% fully franked. It seems better to be a shareholder than a bank customer.
Here are two more stocks that could power your savings and investing into the future.
Insurance Australia Group Ltd (ASX: IAG)
The big general insurance company with brands like NRMA Insurance, CGU and SGIO weighs in strongly with a fully franked 6.1% yield. In a relatively benign period of fewer large scale natural disasters, the insurer has consolidated its financial strength and even acquired the insurance underwriting business of Wesfarmers Ltd (ASX: WES) recently which will boost its insurance market share. The insurer can help support your long-term dividend income returns.
JB Hi-Fi Limited (ASX: JBH)
As a leading electronics retailer, the company has been ahead of the pack amongst retail stocks in maintaining solid earnings growth in a weaker retail environment. The demand for tablet PCs, mobile phones and gaming consoles help keep revenue steady and growing. Also, lower petrol prices and the chance of even lower interest rates may spur on retail sales over the next year, so investors should follow JB Hi-Fi closely. The stock trades at 12.5 times earnings and pays an attractive 5.3% yield fully franked.
