Interest rates are really low these days. What are you supposed to do if you can’t even get 2% from your bank account? Shares with dividend yields above 6% could be the answer.
If you pick shares with yields above 6% the yield is high enough that you could still keep some money as cash.
Here are three ideas:
WAM Research Limited (ASX: WAX)
WAM Research is a listed investment company (LIC) which invests in undervalued growth businesses on the ASX.
Over the past five years it has generated returns of 14.4% per annum before fees, expenses and taxes, so WAM Research pays out a growing dividend from this performance. It has increased its dividend every year since the GFC, which is a great record.
It currently has a grossed-up dividend yield of 9.25%.
NAOS Small Cap Opportunities Company Ltd (ASX: NSC)
Assuming a quarterly 1 cent per share dividend, Naos Small Cap Opportunities offers a grossed-up dividend yield of 7.6%.
This LIC invests in small caps on the ASX with market caps between $100 million to $1 billion, but it only invests in shares that the investment team have high conviction with for the long-term. That’s why it only owns 11 different shares. Some of the shares that it has invested in are MNF Group Ltd (ASX: MNF), Service Stream Limited (ASX: SSM) and 360 Capital Total Return Fund (ASX: TOT). It’s a diverse group of businesses with good growth potential.
Naos aims to deliver shareholders a sustainable growing stream of fully franked quarterly dividends.
Tassal Group Limited (ASX: TGR)
Tassal has a trailing grossed-up dividend yield of 6.1%.
It’s Australia’s largest fish business with large salmon and prawn farms. There is growing demand for healthy Australian grown fish which are produced with sustainable practices.
The last several years has seen Tassal grow its operating earnings and margins. It’s investing in the latest fish infrastructure to reduce costs and increase margins. It’s also planning new farms.
Further growth is expected over the long-term and the share price decline could be a long-term opportunity.
Each of these shares could be strong long-term performers for dividends. I think WAM Research could be the best pick because of its large yield, however the Naos LIC is trading at a 15% discount to its net assets, which is an attractive discount.
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Tristan Harrison owns shares of NAO SMLCAP FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of MNF Group Limited. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended Brickworks, MNF Group Limited, and Service Stream 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.