Cash is old fashioned. Does anybody bother with the plastic stuff anymore? Not when it’s earning a measly 2% in the bank, if you’re lucky. Here are 3 dividends that smash term deposits to shreds, and have the tax benefit of franking credits on top:
Fortescue Metals Group Limited (ASX: FMG) – yields 6.2% fully franked
With the upturn in iron ore prices and the great work done to lower its costs, Fortescue Metals has shaped up as a cash-generating machine. Its most recent dividend was 20 cents (or 3.2%) declared at the half year, which should work out to greater than a 6% dividend over the full year – with franking credits on top.
The downside is that the company remains vulnerable to swings in the iron ore price, although it does not look expensive in Price to Earnings (P/E) terms. Fortescue could be worth a closer look by the enterprising investor.
Harvey Norman Holdings Limited (ASX: HVN) – yields 6.8% fully franked
Shares in electronics and homewares retailer Harvey Norman have taken a dive recently over some allegations about the way the company accounts for its franchisee results. Harvey Norman has repeatedly denied the allegations, but the falling share price has seen the dividend yield blow out to a juicy 6.8%, fully franked.
Although the allegations are concerning, Harvey Norman has a good track record of improving its operations and shareholders are well compensated by that monster dividend.
Mortgage Choice Limited (ASX: MOC) – yields 7.2% fully franked
I’ve been watching Mortgage Choice from the sidelines with some scepticism for a while now – how many more mortgages could the Australian property market possibly write? A lot more than I thought, although there’s no question that the company is sensitive to possible changes in regulation as well as rising interest rates and property prices. That said, a 7.2% fully franked dividend is hard to beat.
The downside is that Mortgage Choice pays almost all its profits as dividends, so any hit to earnings will also be felt through lower dividends. Given that growth is modest I’d be inclined to leave this one on the shelf for the time being.
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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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