According to Canstar, 3.1% is the best return currently available on a 12-month term deposit. That's pretty disappointing considering that doesn't even take into account the effects of tax and inflation on your investment.
Sure, the sharemarket has been volatile recently, but I still believe it offers the best opportunity for investors to maximise their after tax returns.
Here are five stocks that investors could consider to maximise their income:
1. Asaleo Care Ltd (ASX: AHY) – Asaleo Care is a leading personal hygiene company that owns some of the most trusted brands in the sector including Libra, TENA, Treasures, Sorbent, Purex, Handee and Deeko. The share price has fallen considerably over the past month and now looks quite attractive. Investors need to be aware, however, that Asaleo Care operates in a low growth, mature market and this will make it hard for the company to rapidly grow its earnings. Despite this, at the current share price of $1.60, investors can expect to receive a dividend yield of more than 6.2%, while gaining exposure to defensive earnings.
2. Sydney Airport Holdings Ltd (ASX: SYD) – The dividend might not be franked, but investors can still expect to receive a healthy dividend yield of nearly 4.4%. Investors also get exposure to of one of Australia's highest quality and best performing infrastructure assets. Sydney Airport should continue to benefit from the surge in tourism from Asia and is in the box seat when it comes to the second airport in Western Sydney.
3. FlexiGroup Limited (ASX: FXL) – A number of management changes has seen FlexiGroup's share price get smashed over the past couple of weeks. The company also disappointed the market by forecasting fairly weak growth for FY16. Despite this, the shares are cheap and are trading on a price to earnings ratio of just 9. Investors will also be able to benefit from a fully franked dividend yield of more than 7% over the next 12 months. Considering FlexiGroup will still be likely to deliver profit growth in the year ahead, the current valuation is attractive and I have taken the recent sell-off as an opportunity to add to my holdings.
4. Collection House Limited (ASX: CLH) – Collection House is a fast-growing small cap company that is involved in debt collection and receivables management. Over the past four years, the company has grown its earnings at a compound annual growth rate of 19%. The company has provided FY15 earnings guidance of $21 million to $22 million and this would mean the shares are trading on a price-to-earnings ratio of around 13.5. Collection House is also expected to provide a fully franked dividend yield of close to 4%.
5. Flight Centre Travel Group Ltd (ASX: FLT) – Barring any new negative news, it appears as though Flight Centre's share price may have finally settled into a narrow trading range between $32 and $36. Although the short-term growth outlook is subdued, Flight Centre is still in a strong financial position with around $500 million in cash sitting on its balance sheet. The shares are trading on a price-to-earnings ratio of less than 14 and investors will receive a fully franked dividend yield of around 4.5%.
Although earnings growth is likely to be below trend for the coming year, dividends will still provide investors with an opportunity to smash term deposit rates.
