Dividend investors have another reason to toast the past reporting season. A review of first-half results among S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) companies revealed dividend growth overall was up 5%. The Australian Financial Review reported on Wednesday this growth was about double the rate of underlying earnings growth. Earnings growth would have been higher if not for the mining sector the article from Fairfax media added.
At a time when the general economy and consumer sentiment are weak, companies want to keep shareholder support. Even when they cut costs left, right and centre to improve margins, increasing the dividend attracts investors and gives the stock some price support.
For example, Woolworths Limited (ASX: WOW) reported a disappointing decrease in half-year earnings growth and announced a $500 million cost-cutting program, yet still raised its interim dividend 2 cents to 67 cents per share. BHP Billiton Limited (ASX: BHP) reported half-year underlying net profit was down 31%, but increased its interim dividend 5%.
Good dividend stocks will become more popular among institutional and private investors alike as yields greatly outpace government bond and term deposit rates of return. Record low interest rates in the US are one of the main reasons why the S&P 500 keeps hitting new all-time highs. This could give the ASX a boost as well.
Here are two high-yield stocks investors will want to consider for their portfolios.
Automotive Holdings Group Ltd (ASX: AHE), Australia's largest auto retailer group, reported half-year net profit up 17.4% and the stock yields a hefty 5.3% fully franked. Acquisitions have grown revenue and increased the auto retailer's national dealer network. The company projects growth in the second half due to lower fuel costs and interest rates.
Insurance Australia Group Ltd (ASX: IAG) may be contending with damage claims from recent natural hazards, but the stock's whopping 6.5% fully franked yield should be attractive to pensioners and term deposit savers. The insurer's recent acquisition of Wesfarmers Ltd's (ASX: WES) insurance underwriting business led to a 17.1% gain in general written premiums and added to the company's general insurance market share. However, a 9.8% decrease in half-year net profit has lowered the stock 9.9% since the results release.
