The income you can get by leaving money in the bank is pretty bad these days. It’s crazy to think that with a million dollars in the bank the most you might be able to get is $30,000, with most accounts offering less of a return than that.
So, what should an income-seeking investor do?
I think Australian shares are the answer. Many experts agree that, on the income side of things, Australia investments are hard to match for the income they can produce.
Here are three ideas:
WAM Leaders Ltd (ASX: WLE)
WAM Leaders is one of the newest listed investment companies (LICs), it focuses on the large end of the ASX market, meaning shares in the ASX200.
So far, its portfolio has outperformed the S&P/ASX 200 Accumulation index since inception. The WAM Leaders portfolio has returned an average of 10.9% per annum before fees since May 2016, whilst the index returned 8.3%.
WAM Leaders has increased its bi-annual dividend to 2.5 cents per share, which equates to a grossed-up dividend yield of 6.4%.
InvoCare Limited (ASX: IVC)
InvoCare is Australia’s largest funeral operator with a market share of around a third. The share price has recently taken a heavy hit, diving from almost $18 to today’s $11.60.
The company has forecast a small decline in operating earnings this year as it invests heavily to change to customer needs. The market is also worried that the price war that’s occurring in the UK could also happen here.
I’m not as confident about InvoCare as I was a year ago, but this fall in share price more than makes up for the market negativity. InvoCare management believe the company could grow its market share up to the 40% mark with the investments it’s making.
The share price decline has also boosted the dividend yield significantly, it’s currently trading with a grossed-up yield of 5.67%.
Clime Capital Limited (ASX: CAM)
Clime is another LIC, but it takes a much more varied approach with investing compared to WAM Leaders. It invests in ASX large caps, medium caps, small caps and overseas shares.
Clime may not deliver the most exciting returns, but it is slowly but steadily growing its dividend. It currently has a grossed-up dividend yield of 8.35%.
I believe all three will be solid income choices over the next few years. However, considering the two LICs charge fees, I would be inclined to invest in InvoCare shares because of how much better value it currently is compared to recent history.
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Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited and Ramsay Health Care Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited and Webjet Ltd. 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 Scott Phillips.