The big four banks have been long considered as safe, long-term investments that create sustainable and growing dividends for their shareholders.
And to be fair, this has been mostly true over the past 10 years. For example, the share price of the Commonwealth Bank of Australia (ASX: CBA) has doubled in price since 2005 and at the same time, the dividend has also more than doubled – even with the GFC occurring during that time.
Most investors would be aware, however, the short to medium-term growth outlook for the big four banks is less certain now than it was just a couple of months ago. Capital raisings, concerns about a slowing property market, rising bad debts and a general slowing in credit growth are all issues facing the big four banks which the market is already factoring into their share prices.
Although I believe the banks still offer a very attractive dividend yield at the moment, I don't think their share prices will be heading towards their April highs anytime soon.
So with that in mind, here are four alternative stocks with solid dividend yields and positive long-term growth outlooks:
1. Retail Food Group Limited (ASX: RFG) – Retail Food Group owns some of Australia's most popular franchises including Gloria Jean's Coffee and Donut King. The company has a strong track record of integrating acquisitions successfully and is rapidly expanding its operations internationally. Retail Food Group is forecasting for 20% earnings growth in FY16 and investors can expect to receive a fully franked dividend of around 5.2%. With the shares trading at 12x FY15 earnings, this is a unique opportunity to gain exposure to a company that can provide both growth and income.
2. BWP Trust (ASX: BWP) – Although the dividends are unfranked, BWP Trust has been able to consistently increase its dividends paid to shareholders over the past five years. BWP Trust is backed by its major tenant, Bunnings Warehouse, and commands a portfolio which is geographically diverse that generates defensive earnings. At the current share price, investors can expect a forecast dividend yield of 5.3%.
3. Navitas Limited (ASX: NVT) – Navitas' share price has taken a beating over the past year as a result of the loss of a significant university contract, but is now trading at a fairly attractive price. Although the risk for further contract losses remains, the overall demand for Navitas' services remains robust and is likely to grow over the long term as the number of international students travelling abroad to complete their studies increases. Investors can expect a fully franked dividend yield of around 5% over the coming year with the expectation of earnings growth to increase from FY17 and beyond.
4. Tassal Group Limited (ASX: TGR) – Tassal's share price has bounced back nicely over the past six months as a result of strong full year results and the conclusion of a Senate inquiry into the sustainability of aquaculture in Tasmania. In addition to this, Tassal has boosted its long-term growth potential with the acquisition of De Costi Seafoods that will provide it with additional seafood products and market penetration. The demand for salmon and seafood products continues to grow as consumers search for healthier food options and this is a trend that is likely to continue. Analysts are forecasting a dividend of 16 cents per share in FY16, and based on the current share price of $4.05, investors can expect a dividend yield of nearly 4%.
Interest rates are expected to stay lower for longer and this means high-quality dividend stocks will remain in strong demand for the foreseeable future. Luckily for investors, the experts as The Motley Fool have identified one ASX stock that is guaranteed to beat term deposits!
