After reaching an all-time high of approximately $37.71 in April last year, the price of Woolworths Limited (ASX: WOW) has gradually declined as negativity surrounds the retail giant. This has taken many investors by surprise as the last two decades has seen Woolworths become one of Australia's most reliable dividend-payers, widely held in both institutional and household portfolios.

However, it seems investors are starting to doubt Woolworths' ability to maintain its previous success. With the stock currently trading around $27, this represents more than a 25% discount on the share price this time last year. But are the company's prospects 25% worse? Investors need to consider whether the sell-off has been justified.

On face value, there is a lot to like about the retail conglomerate. Woolworths has only once, during the last 20 years, declared to shareholders an annual dividend yield of less than 5% (in 2007). Companies on the ASX sporting a dividend of equal reliability are few and far between. Woolies' success in maintaining distributions to shareholders can be attributed to its stellar track record of steady profit growth and its management team.

The ability to maintain that steady growth is largely due to outstanding defensive characteristics that bring in customers despite unavoidable downturns in market conditions. Its core revenue generator, the supermarket chain, has provided income stability through the GFC, oil crisis, high/low interest rates, and numerous other economic shocks. Regardless of these challenging events, consumers' need to purchase food and groceries results in a solid revenue stream during the best and worst trading conditions.

Unfortunately, the stock price decline is not entirely unfounded. There are a number of skeletons in the closet that have begun to place significant pressure on Woolworths' ability to maintain its market dominance.

Low-cost retailers Costco and Aldi have only just begun dipping their toes in the Australian retail market. Although their current market share is not a reason for Woolworths to sound the alarm bells just yet, their continued Australian expansion will place additional pricing pressure on Woolworths going forward.

The well documented struggle of Woolworths' home improvement chain, Masters, is also a point of consideration. Bunnings — owned by Wesfarmers Ltd. (ASX: WES) – continues to maintains its go-to status among consumers for professional and DIY hardware. Given its significant efforts thus far, Woolworths does not look to be standing down anytime soon, and it appears it will be persisting in its endeavour to gain market share in this space. There is reason to believe that Masters could become a turnaround success, however this will likely require significant and continual capital expenditure.

Foolish takeaway

For the better part of two decades, Woolworths has maintained its position as one of the leading ASX retail giants. Investors should not assume this previous success will simply continue uninterrupted, and should cautiously consider the notable headwinds the business faces in the short- to medium-term. If management is able to find the necessary solutions, as it has done diligently to date, Woolworths could very well be undervalued at today's prices.

The post Woolworths Limited: Are we being presented a fantastic buying opportunity? appeared first on The Motley Fool Australia.

More reading

• 5 ASX dividend shares I'd buy for a second income
• Should you buy Woolworths shares for the 'steady dividends'?
• Stagflation: How to position an ASX stock portfolio
• How to build a second income from ASX shares without taking big risks
• Buy, hold, sell: Xero, Woolworths, CBA shares

It's no secret that with bank interest rates hovering at 2% (and predicted to fall further in the short term) the hunt for a higher yield among investors is as fierce as it has ever been. The market is currently rushing to what are considered the most 'reliable' income-producing stocks, including Telstra, Woodside Petroleum and the big banks.

However, simply targeting yield percentage without considering share price can often be detrimental to your portfolio's value. As seen with the recent fall in the share price of the Commonwealth Bank of Australia (ASX:CBA) in May, the current market environment is causing investors to overlook the potential capital losses that can occur in the wake of nominally large yields.

As investors continue to look for a better yield in this low interest rate environment, it's important to focus on solid, fairly priced stocks with good opportunities for growth. The following are three examples of stocks that I think present great growth prospects while offering solid dividends to shareholders.

1. QBE Insurance Group Ltd. (ASX:QBE)

Once a profit powerhouse, QBE offered investors massive returns only a short time ago. In 2009, shareholders received a payout of $1.28 per share, which after being franked at 20% represents more than a 9.5% yield on today's price. Unfortunately, recent unsuccessful expansions into overseas markets and high claims due to poor weather conditions have put QBE on a downward spiral. Under a new management team led by CEO John Neal, the company is shifting its focus onto the core profit centres.

Although down from its previous highs, QBE is now sporting a forecast dividend of 3.3% with 100% franking in 2015. With the removal of poor performing business lines, such as the sale of its Argentine worker's compensation business in February this year, QBE may well be back on the upward path to its previous profit highs. If it's successful, investors will have the potential for some solid capital gains while maintaining a healthy dividend along the way.

2. REA Group Ltd. (ASX:REA)

The operator of Australia's leading real estate website (realestate.com.au) may seem like an odd pick when hunting for yield. Analysts are forecasting a modest yield to shareholders of between 1.8-2.0% before franking in the 2015 financial year.

REA Group currently provides a 50% payout ratio, which is quite low when compared with other leading online operators. Further, investment in international real estate websites is becoming a key focus of the company's future, as shown by the decision to take a significant stake in southeast Asia's iProperty Group Ltd. (ASX: IPP). Attractive international growth prospects coupled with a nominally low payout ratio could spell big dividends in the medium term.

3. G8 Education Ltd. (ASX:GEM)

This aggregator of childcare centres has fallen out of favour with investors in recent months. In fact, the price has been driven so low that G8 now sits on a huge forecast dividend yield of over 9.1% after franking.

As it expands in the highly fragmented childcare industry, G8 continues to purchase more centres under a strict policy of paying no more than four times annual earnings for a given centre. Although it presents more risk than the two companies above due to the potential changes in government policy surrounding the industry, G8 provides investors a massive yield along with solid capital growth.

Foolish takeaway

All three of the above companies offer investors attractive yields at reasonable prices. Of the bunch, QBE appears to be the most balanced in my view. Although not out of the woods yet, QBE stands to offer investors strong growth and attractive yields while being backed by an incredibly strong brand name in the insurance market. I am a happy holder at today's prices.

The post 3 dividend stocks at very reasonable prices  appeared first on The Motley Fool Australia.

More reading

• 5 ASX 200 shares with renewed buy ratings this week
• Down 50% in the past year, are these ASX 200 shares too cheap to ignore?
• 2 elite ASX shares to buy in April and hold for the next decade
• 3 ASX 300 shares to buy and hold for the next decade
• How to build a Warren Buffett-inspired ASX share portfolio

Oil and gas producer Senex Energy Ltd. (ASX: SXY) has seen its share price rally almost 20% year-to-date as investor sentiment is becoming increasingly positive. This is likely because of a recent upturn in the oil price, with Brent Crude trading around US$63 today, up from its five-year low of US$45.13 in January this year.

But are these signs of big returns to come or should investors think twice before jumping into this hot mid-cap oil stock?

Low oil prices over the past 10 months have caused many headaches among oil and gas producers, and Senex Energy is no exception. The challenges could be seen in Senex's most recent quarterly report, which showed negative results across a wide range of key performance indicators. Quarter-over-quarter performance saw sales revenue plummet 21%, following a decrease in both sales volumes and average realised oil price of 11.4% and 11.1%, respectively.

The weakening AUD against the greenback had partially offset the lower average price received (price-per-barrel is measured in USD), however the impact had been marginal. Further to this, hedging instruments put in place to counteract a price downturn only managed to provide a benefit of $3 per barrel.

In line with a guidance revision released in January, Senex Energy also saw capital expenditure fall by a total of 47.7% quarter-over-quarter. This precaution has been taken to preserve balance sheet strength and ensure adequate cash flow is maintained throughout this period of low oil prices. Although this will help provide essential liquidity over the short term, as with all energy producers, a lower capex will impact Senex Energy's ability to maintain its strong oil reserves over the medium term.

Despite this, investors should not simply focus on the current tough market conditions surrounding what is arguably one of the most attractive mid-cap oil and gas producers on the ASX. Although difficulties in the energy sector are having a drastic impact on current performance, Senex Energy is well placed among its peers to weather the storm.

Unlike a large proportion of similar sized producers, Senex Energy carries minimal debt, boasts a relatively low cost of production and benefits from a healthy amount of oil reserves. On top of its $63 million cash balance, a new debt facility of $80 million was established in April to provide further fiscal security, which it has stated it currently has "no requirement to draw down on".

Foolish takeaway

All in all, the recent rally in both the oil price and investor sentiment is not likely to continue over the short to medium term. The difficulties shown in Senex Energy's most recent quarterly report are still looming and the current quarter's performance is predicted to show only marginal improvement.

As significant volatility is still present in the oil and gas market, investors would be wise to think twice before committing their hard-earned funds. For those predicting a turnaround in oil prices over the medium to long term however, Senex Energy should be well placed to outperform its peers in the future.

The post Is Senex Energy Ltd. set to provide investors big returns in 2015?  appeared first on The Motley Fool Australia.

More reading

• How high could Cochlear shares bounce back? Brokers disagree
• Guess which ASX iron ore stock could rise 85% (hint, not Fortescue shares)
• Guess which ASX 200 bank stock is pushing higher on Friday (hint, not CBA shares)
• This ASX lithium stock is bouncing back today. Here's why
• Guess which ASX tech stock is rocketing 22% on big news