What happened: The Reserve Bank of Australia (RBA) decided to hold the cash rate at 2.25% at its April Board meeting earlier this week.
The last time the RBA raised interest rates was in November 2010, when the cash rate was lifted to 4.75%. This level remained unchanged for a year until November 2011 and ever since then the RBA has had an easing bias which has seen the bank cut the cash rate on nine occasions, most recently in February 2015.
Why: Many economists were surprised that the RBA didn't cut again this month, however, it could simply be a matter of when, not if further cuts occur.
In maintaining the status quo the Governor of the RBA, Mr Glenn Stevens noted that:
- growth is continuing at a below-trend pace, with overall domestic demand growth quite weak
- the unemployment rate has gradually moved higher over the past year
- credit is recording moderate growth
- the Australian dollar has declined noticeably against a rising US dollar over the past year
Now what: Judging by the tone and actions of the RBA, investors should certainly be prepared for further cuts in the near future. For investors with a preference for an income stream rather than a focus on capital gains, high yielding stocks will continue to hold appeal.
Here are three stocks which could see increased buying demand over the coming months as investors seek out high-yielding stocks…
The digital economy remains a growth area and niche stocks like Carsales.Com Ltd (ASX: CAR) should continue to benefit. The online classifieds business is forecast to grow earnings and dividends over the next two years.
The financial services sector in Australia remains an appealing area thanks to the continual flow of superannuation funds into the sector. Leading global fund manager Platinum Asset Management Limited (ASX: PTM) is well placed to benefit and indeed is forecast to grow dividends and earnings this year and next.
Defensive stalwart Telstra Corporation Ltd (ASX: TLS) is a favourite of yield seekers and with a dividend which is forecast to increase to 31.7 cents per share in financial year 2016 (according to data from Morningstar) it is likely to remain so.
