It is rumoured that one of the richest men to walk the earth, John D. Rockefeller, once said that the only thing that gave him pleasure in life was to watch his dividends roll in. Certainly, there are many other things that may give you pleasure in your life, but for many investors the key reason they invest is to see their income rise and, in turn, their standard of living and financial future improve.
Of course, desiring a higher income and actually achieving it are two very different things. However, stocks paying high yields are available for everyone to invest in and, in the long run, can make a huge difference to your income when compounding is taken into account. With that in mind, here are three stocks offering great yields and bright future prospects.
Telstra Corporation Ltd
Over the last 10 years, Telstra Corporation Ltd's (ASX: TLS) earnings growth rate has been hugely disappointing. That's because it has equated to 1% per annum and this has meant that dividends per share have had to be cut back by 3.3% per annum during the period.
However, Telstra still yields an appealing 4.9% (fully franked) and offers excellent long-term earnings growth potential due to its increased diversification (such as in to health care) as well its increasing exposure to faster growing markets outside of Australia.
So, while it trades at a premium to the ASX, with it having a price to earnings (P/E) ratio of 17.9 versus 16.6 for the wider index, its total shareholder returns could continue to be impressive after having totalled over 20% in the last year alone.
Commonwealth Bank of Australia
When it comes to dividend growth, Commonwealth Bank of Australia (ASX: CBA) has a superb track record. For example, in the last 10 years it has increased dividends per share at an annualised rate of 8.2%. And, looking ahead, they are forecast to rise by 5.1% per annum in the next two years, which puts CBA on a forward yield of 5.3%.
Of course, its third quarter was a rather challenging one and caused investor sentiment to weaken, with the bank's shares falling by as much as 6% on the day of the announcement. However, with its shares trading at a discount to the ASX (they have a P/E of 15) and CBA being expected to increase its bottom line by 4.9% in each of the next two years, it remains a great value income play.
Suncorp Group Ltd
Over the last three years, shares in Suncorp Group Ltd (ASX: SUN) have delivered a total return of 27.3% per annum. Looking ahead, there could be more to come as the diversified financial company offers a 6.1% yield and is expected to increase dividends per share at an annualised rate of 9.3% during the next two years.
Furthermore, Suncorp offers a wide margin of safety at the present time, with it having a price to earnings growth (PEG) ratio of just 0.48. This compares favourably to the ASX's PEG ratio of 2.33 as well as the wider insurance sector's PEG ratio of 0.84. In addition, with a beta of 0.88, Suncorp remains a relatively defensive play, too.
