With the European Central Bank (ECB) cutting rates to 0.5% in its latest meeting, many are tipping the U.S. Federal Reserve and Bank of Japan to follow suit.
Closer to home, the Reserve Bank of Australia (RBA) has already slashed rates by 50 basis points (bps) to 1.00% p.a. but we could see rates finish the year closer to 0.5% here in Australia.
Given this low-yield environment, here are 3 high-yield stocks that could provide an alternative to a term deposit or high-interest savings account in 2019.
1. Alumina Ltd (ASX: AWC)
In terms of dividend yield, Alumina leads the pack in the S&P/ASX 200 Index (INDEXASX: XJO) with a net yield of 10.9% per annum.
The Aussie alumina mining company’s share price has climbed 10.8% higher so far this year, which to me shows you can have high dividends without trading away share price growth.
Alumina’s biggest exposure is to global alumina prices, meaning a change in the technical environment for the metal could trigger a share price collapse or a surge depending on the direction.
A yield of 10.9% per year is tough to beat for any investor, meaning Alumina could be a good option if you’re seeking more Metals & Mining sector exposure in 2020.
2. IOOF Holdings Ltd (ASX: IFL)
The IOOF share price has climbed 11.7% higher in 2019 but still remains a long way shy of its pre-2018 Royal Commission valuation.
IOOF shares were trading at over $11 per share at the start of 2018 but are now valued at just $5.62 per share – with an ASIC-led leadership overhaul and superannuation scandals plaguing the Aussie wealth manager.
However, IOOF shares are currently yielding 6.67% per annum, and while I’d be wary of dividend changes if earnings continue to slide, could provide a good dividend if we see a share price recovery in 2020.
3. National Australia Bank Ltd (ASX: NAB)
Amongst the Big Four banks, NAB has long held the crown for the highest yielding stock amongst the group.
NAB shares are currently yielding 6.21% per annum, giving you a healthy 446 bps margin over and above even the highest yielding term deposit from Bank of Queensland Ltd (ASX: BOQ) at 1.75% per annum.
The NAB share price is up 23.99% so far this year as the Big Four bank share prices recover from the Royal Commission and, despite slashing its dividend in May, could provide an alternative to IOOF in the Financials sector.
The key to beating a low-interest-rate environment is to be proactive rather than reactive.
If you’re happy to conserve your capital and forgo some potential capital gains, you could simply park your hard-earned cash in the bank and wait for a market correction.
However, for those that are more interested in some high dividends in the meantime, these 3 ASX stocks above are a great starting point for 2020.
If you're on the hunt for yield before the end of the year, be sure to check out these 3 dividend stocks below as well!
With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.
Hint: These are 3 shares you’ve probably never come across before.
They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”
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The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.
Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. 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.