High-yield hunters are closing in on big dividend stocks. Regular investors are having to compete with term deposit savers who are being pushed into the share market for decent returns and protection from inflation.
Interest rates are still trending down. With no real reason for them to turn back up in the near future, bank deposit savings will trudge along, only eroding investor capital over time.
That means the more that high-yield stocks are chased, their share prices rise, making them less attractive in valuation. In addition, yields conversely drop as the share price heads up.
Still, I know of three decent stocks with yields over 4.5% that are not too expensive…yet.
Retailer Harvey Norman Holdings Limited (ASX: HVN) has seen a resurgence in share price after posting strong half-year results. A rise in home furnishings and appliances usually follows a growing housing market. Fuelled by low interest rates, property sales are on the rise. The stock yields 5.2% fully franked and I believe it has further to go.
National Australia Bank Ltd (ASX: NAB) still lags its big four bank peers, but that in turn keeps its 5.2% yield higher than the rest. Analysts are looking towards earnings improvement as NAB steadily offloads its UK assets, which have weighed down performance for a number of years. With those gone, the bank's outlook looks much better in the long term.
Distressed stock McMillan Shakespeare Limited (ASX: MMS) seems to be making a stable turnaround over the past year. The salary packaging, novated vehicle leasing and vehicle fleet management service provider should see a boost in business with the recent rise in new car sales. Falling interest rates are making car purchases and leasing more affordable. This is helping the company return to its previous high growth trend. The stock yields 4.6% fully franked.
