With the RBA cutting interest rates to 2.25% this week, dividend yields could become even more important to Aussie savers and investors. After all, high street savings rates barely cover inflation, let alone offer a real return.
So, stocks with decent yields could become more popular and see their share prices move higher as their stock becomes more in demand. One company that could, therefore, benefit is Transurban Group (ASX: TCL). Its yield of 4% remains relatively attractive and, when you consider that Transurban is forecast to increase dividends per share at an annualised rate of 11.1% over the next two years, its appeal becomes even greater.
As such, now could be a good time to buy Transurban, since it offers great income potential and the prospect of a share price rise, too.
When it comes to consistency, Woolworths Limited (ASX: WOW) is hard to beat. Certainly, its business model is consistent and food retailing is a very defensive industry, but Woolworths is also very impressive when it comes to adding value to its own business.
For example, over the last 10 years Woolworths has been able to grow its book value at an annualised rate of 16.6%. That’s a stunning rate of growth and shows that Woolworths, even after capital raisings, is a highly profitable and efficient business.
Furthermore, it remains an appealing defensive option and so could prove to be a worthy holding should the RBA’s lower interest rate fail to stimulate the wider ASX. For example, Woolworths has a beta of just 0.66, which means that its shares should fall by 0.66% for every 1% drop in the ASX, which could help it to outperform a weak wider market this year.
On the face of it, Cochlear Limited (ASX: COH) appears to be grossly overvalued. After all, with the ASX trading on a price to earnings (P/E) ratio of 15.4, Cochlear’s P/E ratio of 37.7 seems rather extreme. However, the hearing device company is on the cusp of a period of stunning earnings growth, with it being forecast to post bottom line growth of 35.8% per annum over the next two years.
That’s considerably more than the wider market’s forecast growth rate and, when it is combined with the company’s P/E ratio, it generates a price to earnings growth (PEG) ratio of just 1.05. This indicates that growth is on offer at a very reasonable price and, looking ahead, Cochlear could prove to be a strong performer during the course of the year. As such, now could be a great time to buy a slice of it.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Peter Stephens does not own shares in any of the companies mentioned.
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