More passive investors will be seeking shelter in the share market as bank deposit interest rates get squeezed by the RBA interest rate cut this week. And you know it probably won't be the last one. A 0.25% decrease may not do much, so some bank economists are suggesting another 0.25% needs to be chopped for any kind of real effect.
If you're a homeowner with a mortgage, the more cuts the better. If you are a retiree or someone getting close to retirement who is banking on interest income to live on, this may not be encouraging at all.
Even for those people who have a decade or two before they retire, getting the biggest bang now for your retirement buck later has never been more important.
That's why I chose two growth stocks paying a good dividend yield that could be a substitute for the 4% plus interest rate some term depositors used to get.
First, Ardent Leisure Group (ASX: AAD) offers a 4.8% yield unfranked and is forecast to increase earnings an average 13% annually over the next few years. The company operates theme parks like the Gold Coast's Dreamworld and Whitewater World, bowling centres, health clubs, as well as the Main Event family entertainment centres in the US.
One note though- the company's entertainment centres in the US state of Texas could be affected by the oil price downturn, so that is something to look for when the company reports earnings.
IOOF Holdings Limited (ASX: IFL), the investment portfolio administration and financial planning service provider, could be a good choice for growth and dividend income. In financial year 2014, it raised earnings 12.6% and it looks like that solid growth is likely to continue. Consensus earnings forecasts indicate an average annual 11.8% gain over the next two years could be in store.
The stock pays a hefty 5.1% fully franked yield, so that should relieve passive income investors. IOOF Holdings has been helping customers earn and save for their retirement, so you can benefit too, by owning some IOOF Holdings shares.
