Although the Reserve Bank of Australia decided to keep interest rates at 2.25% when it met yesterday, the overwhelming consensus in the business community is for lower interest rates in both 2015 and 2016.
That means lower returns from term deposits, savings accounts and fixed interest investments.
Conversely, it means higher valuations for stocks and much greater demand from those searching for yield.
5 dividend stock ideas for your watchlist…
If you don’t know which stocks to put on your watchlist, or are looking to add some income stocks to your portfolio, here are five big dividend payers to keep your eye on.
|Company Name and Ticker||Forecast Gross Dividend Yield||Market Capitalisation|
|Bendigo and Adelaide Bank Ltd (ASX: BEN)||7.8%||$17.5 billion|
|AusNet Services (ASX: AST)||6.5%||$5.22 billion|
|Scentre Group (ASX: SCG)||6.7%||$20.07 billion|
|BWP Trust (ASX: BWP)||5.2%||$1.95 billion|
|National Australia Bank Ltd (ASX: NAB)||7.5%||$93.99 billion|
As can be seen above, despite a strong rally in the Australian sharemarket – benchmarked by the S&P/ASX200 (ASX: XJO) (Index: ^AXJO) – many stocks are still forecast to pay handsome dividends well in excess of the current RBA cash rate.
However before adding any stock to your portfolio it is vital to do some research into the business, by asking questions such as: How does this company make money? What will the industry look like in five years? What are the risks? Is now the right time to buy shares?
These are basic questions that anyone can answer after reading through some annual reports, doing some industry research and possibly speaking to management, then joining the dots.
For example, it doesn’t take much research to know that house prices are punching to new highs in major cities – especially Sydney and Melbourne – so buying bank stocks (Bendigo and NAB) probably isn’t a good idea right now.
Arguably, despite their lower dividend yields, the other three stocks may be better alternatives. However, once again, it’s important to understand the risks.
BWP Trust owns property which it then leases to businesses like Bunnings Warehouse, but is exposed to the often fickle retail industry.
Finally, AusNet Services owns electricity networks throughout Australia. This is a heavily regulated industry and one which is undergoing significant change with more consumers switching to low-cost renewable energy sources.
These 3 stocks could be the next big movers in 2020
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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. Owen welcomes your feedback on Google plus (see below) or you can follow him on Twitter @ASXinvest.
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