The global interest rate environment is looking increasingly gloomy for savers. The current interest rate for Australia sits at just 0.75% and savers will struggle to find anything over 2% in a savings account or term deposit.
However, low interest rates do attract more capital inflows into the financial markets and riskier assets. This is one of the driving factors behind the ASX 200 being up more than 15% this year.
If you're a saver looking to transition into investing, here are 3 large-cap, high dividend-paying shares that I think represent a great place to start.
1. WAM Capital Ltd (ASX: WAM)
WAM is a listed investment company (LIC) managed by Wilson Asset Management. It holds a diverse portfolio with some of the following weightings as of September 2019.
- Consumer Discretionary: 20%
- Financials: 19.1%
- Industrials: 13.1%
- Information Technology 11.2%
- Cash: 20.4%
The diversity in WAM's portfolio as well as disciplined, value driven investments has made it a very stable stock. The company currently pays a dividend yield of 7.0% or a gross-yield of 10%.
2. BHP Group Ltd (ASX: BHP)
Iron ore miners have been able to provide investors with market-leading yield thanks to the rise in iron ore prices. The iron ore outlook is also looking solid in the short–medium term as the world's biggest iron ore miner, Vale SA, is still slow in ramping up production after its tailings dam disaster.
I would prefer to be invested in BHP or Rio Tinto Ltd (ASX: RIO) as opposed to a pure iron ore player such as Fortescue Metals Group Ltd (ASX: FMG). The diversification in operations offers investors a little less volatility if the iron ore spot price goes south. BHP currently pays a 5.6% dividend yield or 8% gross yield.
3. Commonwealth Bank of Australia (ASX: CBA)
Surprise, surprise, a big four bank in a dividend article.
Economic conditions are relatively sound, while borrowing rates for households and businesses (as well as banks' funding costs) are at historically low levels. In the Reserve Bank of Australia (RBA)'s October minutes it cited that "housing loan approvals to both owner-occupiers and investors had increased in the three months to August, consistent with stronger conditions in some established housing markets." However, this increase in approvals has not yet translated into faster growth in housing credit.
The RBA also stated that while "banks' profitability had declined a little over the prior year or two", they still "remained highly profitable". Investing in CBA may seem cliché, but it offers investors a reliable 5.5% dividend with stable earnings.
