With the S&P/ASX 200 (Index: ^AJXO) (ASX: XJO) gradually creeping higher — it's up 9% since this time last year — it becomes a challenge to find a few good stocks that can be bought at a reasonable price and held for the long term.
However, I have three that I think represent reasonable value for the patient investor.
ASX Ltd (ASX: ASX)
It's hard to forget the stock code for this one! The ASX, of course, is Australia's major securities exchange, and exhibits strong cashflows and earnings courtesy of it's almost-monopoly-like position at the centre of the country's financial services industry.
Sharemarket volatility will prove to be a big tailwind for the ASX as its continued profitability depends on investors and speculators buying and selling consistently. Although the degree of sharemarket volatility can vary, I'd expect there to be higher volumes of shares and other securities traded on the ASX over the next 3, 5 and 10 years making this an attractive option for most portfolios.
The fully franked dividend yield is currently 3.9% and it looks to be good value.
ARB Corporation Limited (ASX: ARB)
Disclosure: I own shares in ARB and so I could be considered biased in my view on this one. However, I unashamedly believe this to be one of the best-managed companies on the ASX. Is it any wonder when you consider that Andrew and Roger Brown — hence, the ARB — between them own north of $260 million in shares.
The company is Australia's largest manufacturer and distributor of 4WD and SUV accessories and continues to expand its presence internationally.
The share price has come back from its previous highs of over $18 and today presents better value at around the $16.50 mark. The dividend yield is a fully-franked 2%, but it is a stock that's better held for capital growth over at least 5-10 years.
TPG Telecom Ltd (ASX: TPM)
TPG is a telecommunications company, led by dominant shareholder and CEO David Teoh, that provides phone, internet (ADSL and increasingly NBN connections) and SIM only mobile phone plans. It also owns its own telecommunications infrastructure throughout Australia as well as an international submarine cable.
Last month, the company announced that it successfully bid for mobile spectrum in the 700Mhz band which will allow it to build its own mobile network in Australia, competing with Telstra Corporation Ltd (ASX: TLS), Optus and Vodafone. In conjunction with this, TPG launched a 1 for 11.13 accelerated pro-rata entitlement offer where existing shareholders can buy shares at $5.25 per share to help pay for the $1.9 billion cost in building the network.
The share price has fallen from north of $12 to just under $6 today, and provides a fully-franked dividend yield of 2.6%.
However, it isn't the yield investors should be buying these shares for. Teoh is aiming to make TPG a bigger and better company, and isn't scared of taking on its larger competitors. If you have a lot of patience and resilience to withstand share price volatility, and if you share Teoh's ambitions, this could be a stock to buy for the next 5-10 years.
As an investor though, you have a lot of options to park your money and the three stock ideas above are just a tiny sample out of the many hundreds of investment-grade companies on the ASX. It's difficult to find a good yield these days and if the companies above don't quite suit your income needs, you can also consider one more stock which you can read about by clicking on the link below.
