In a low interest rate environment of 1.5%, term deposits and 'income assets' like property and bonds are yielding, let's be honest, sod all.
Worse still, some economists suggest interest rates could go even lower — yes, below 1.5%!
Don't JUMP off this ASX dividend machine!
There are many quality shares on the ASX (included in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO)) which offer dividends well in excess of what you will get from the bank.
Take Retail Food Group Limited (ASX: RFG) as an example. Retail Food Group is the owner of Brumby's Bakery, Crust Pizza, Pizza Capers, Donut King and Gloria Jean's. Although you may not realise it at first, it is a household name to many Australians.
Gloria Jean's is a key asset for the company, with the group likely to take its Australian expertise abroad. Anyone who has tasted Starbucks knows the world needs Australian coffee!
Since 2007, the company has increased its dividend each year and analysts are forecasting more of the same in 2017.
Based on analysts' forecasts, Retail Food Group is expected to yield 4.8% fully franked in the year ahead.
Sure, it may not offer the same defensive high-yielding characteristics of, say, National Australia Bank Ltd. (ASX: NAB) or Commonwealth Bank of Australia (ASX: CBA).
But arguably it offers more growth potential, locally and abroad, and is likely to diversify most investors' portfolios away from the banking sector.
Buy, Hold or Sell?
Retail Food Group isn't exactly an obvious choice for risk-averse investors because it is a retailer and it is smaller than a normal blue chip income stock. However, with good brands and management, and a long term strategy at play, I think it may be too early to jump off this dividend machine.
