To generate an income that is at least half decent, Aussie shares are hard to beat.
With ‘high-interest’ bank accounts offering very little in the way of returns, we need to accept that to get a higher return we need to take a bit more risk.
If you’re sick of your cash laying around earning a pittance, here’s two shares to consider to generate better income.
Centuria Metropolitan REIT (ASX: CMA)
This is Australia’s largest ASX-listed metropolitan office REIT. CMA owns a portfolio of 19 high-quality metropolitan assets with a total value of around $900 million spread across all of our major cities.
The demand for metropolitan office space will continue to grow, and CMA targets areas – often on the city-fringe away from construction hotspots – which have an undersupply of office space yet good underlying demand.
Its portfolio’s occupancy rate sits at 97.8% and the average fixed rental increases with tenants are 3.6%. This means the distribution should grow modestly over the next few years. The current distribution yield is 7.6%.
Bank of Queensland Limited (ASX: BOQ)
Shares in BOQ have fallen recently along with the other banks, amid slowing credit growth and of course, the Royal Commission. But one has to wonder, even with low credit growth, when do the banks start to become cheap?
Mortgage arrears are still very low, so the outlook for BOQ is probably best described as subdued, but not terrible. With a grossed-up dividend yield of 10.3%, even if the dividend is cut by 20%, that’s still a gross yield of over 8%.
While BOQ and the banks, in general, are likely to have low growth at best, they’re far from expensive in my view. And they’ll continue to generate a significant amount of cash flow, most of which will be passed on to shareholders.
The thing I like about high-yield shares is when you’re getting a sustainable yield of 6% or more, you don’t need much growth at all to make a good return. Future earnings growth is far from certain, so I prefer to purchase shares with a good level of earnings and dividends today.
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Motley Fool contributor Dave Gow owns shares of Centuria Metropolitan REIT. 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 Scott Phillips.