Given that the Reserve Bank of Australia recently cut cash rates to just 1.75% with a bias to further rate cuts it's no surprise that many Australians are looking to the share market for higher returns.
I don't blame them either, as the high-street banks like National Australia Bank Ltd (ASX: NAB) are now offering just 2.4% on a one-year term deposit, or just 2.75% if you want to lock your hard-earned money away for four years.
No thanks, I would rather look to term-deposit-thumping dividend shares with yields around 5% and the possibility of some capital growth.
The Australian newspaper is today reporting that Deutsche Bank equity strategist Tim Baker has named some of his preferred yield picks that should thump cash in the bank.
So let's take a look at what he's come up with.
Sydney Airport Holdings Ltd (ASX: SYD) is a classic monopoly asset with defensive revenue streams and some powerful tailwinds thanks to a falling Australian dollar and a fast-rising middle-class in Asia fueling international visitor growth. Selling for $7.24 it offers an estimated yield in the region of 4.1% and ticks all the boxes except valuation as it trades on around 55x expected earnings. If global cash rates ever start to normalise (starting off in the US) then Sydney Airport shares could hit turbulence.
APA Group (ASX: APA) is the gas transportation business with defensive earnings stream and a dividend yield in the region of 4.4%. It trades on 44x analysts' estimates for earnings per share in 2016, which is high for a utility-style business that is not going to shoot the growth lights out anytime soon.
Suncorp Group Ltd (ASX: SUN) is the general insurance business that offers a juicy full franked yield of 5.15% based on analysts' estimates for 66 cents in dividends per share over FY16. Moreover, selling for $12.80 its shares trade on around 14x earnings with a moderate growth outlook.
Other stocks the fund manger's screening process identified as good prospects based on their yield and earnings growth potential are:
CSR Limited (ASX: CSR) the building products business just posted a decent full year result and has long-term leverage to the most potent asset class known to mankind in property. Selling for $3.51 it yields a bumper 6.7% and looks a reasonable prospect.
Harvey Norman Holdings Limited (ASX: HVN) is the global furniture and homeware retailer that offers a fully franked dividend yield in the region of 4.6% when selling for $4.56.
Stockland Corporation Ltd (ASX: SGP) is the commercial property business with substantial interests throughout Australia. Selling for $4.54 its shares offer a yield in the region of 5.3%.
Pact Group Holdings Ltd (ASX: PGH) is the packaging business with global horizons and some leverage to the growth of the consumer class in emerging market economies over the long term. Led by an entrepreneurial founder shares look an interesting option and offer a tasty 5.5% dividend yield.
