Shares are riskier than cash. If you own shares, you're implicitly accepting volatile share prices, earnings and dividends that fluctuate, and the chance of a permanent loss of your investment. Even so, many investors have found themselves pushed into the share market as interest rates and yields on term deposits have dropped to record lows.
If your preference is for a secure income and not growing your wealth, then I would suggest checking out these 3 shares:
Insurance Australia Group Ltd (ASX: IAG)("IAG") – yields 5.2% fully franked
IAG is one of Australia and New Zealand's largest home and automotive insurers, and has small and relatively insignificant businesses in south-east Asia. Through some of Australia's most popular brands, IAG attracts a considerable amount of repeat business, year-in and year-out. Earnings can be lumpy, as the company is vulnerable to natural disasters, but in general IAG is well-managed and it's unlikely the company would ever suspend its dividend.
Medibank Private Ltd (ASX: MPL) – yields 4% fully franked
Australia's largest health insurer, Medibank gets a considerable amount of repeat business each year, just like IAG. Unlike IAG however, Medibank has no natural disaster exposure, which should lead to more predictable claims and dividends. Additionally, Medibank is allowed to index its premiums every year to cover the rising cost of healthcare – so any price increases get passed on to customers. I have been critical of Medibank recently, but as an income stock I think it could serve shareholders well.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – yields 3% fully franked
Soul Patts, as it is known, has paid a dividend every year for 100 and something years. These days, most of its income comes from other listed companies on the ASX, like TPG Telecom Ltd (ASX: TPM). So Soul Patts' dividends that it pays are really cash that other companies have paid to Soul Patts. So why not just buy those companies directly? Well by buying Soul Patts, investors are getting conservative, long-term investment management and easy diversification (Soul Patts owns many different investments) all in one purchase.
