David koch savings accounts are paying little interest so have a look at some shares

← Homepage

SAVERS, retirees and other income-focused investors are facing slim pickings at the moment. With interest rates sitting at record lows, savings accounts and term deposits are offering record low returns … and many experts are tipping rates could fall even further.

For those after an income from their investments to fund their retirement or lifestyle, the challenge now is how to maximise income returns while maintaining the appropriate risk levels.

Focusing on term deposits or online accounts will eke out a slightly higher return while the various hybrid corporate bonds are also an alternative.

But many investors are going back to blue chip shares paying a good dividend yield, and the prospect of potential capital growth, as an alternative. These payments can provide much higher returns than youll find in a bank account or term deposit, and may also earn you a tax credit (known as a franking credit).

The trade off, and theres always a trade off when it comes to investing, is to receive these dividends you have to take on the risk that the companys share price could fall as well as rise.

Plus, remember dividend payments are not certain. So if a company is facing tough economic times, for example, it may opt to use profits to shore up its balance sheet or invest in new growth opportunities rather than pay shareholders a dividend.

Thats why its important to consider the dividend yield, the ability to keep paying it and capital growth prospects of a share before investing.

While a very high dividend yield may appear attractive on paper, investors should look for fundamentally strong companies with a favourable long-term outlook and a stable dividend yield, advises Simon Herrman, equity analyst at Wise-owl.com.

Bearing this in mind we rang around a group of six brokers and fund managers for their recommendations on shares which fit that criteria.

Telstra (TLS)

Telstra is Australias largest telecommunication and media company, and is often found at the top of many lists of income generating shares for good reason.

Telstra is a cash generating machine with reliable revenue, a consistent dividend yield of around 5.5 per cent and reasonable long-term capital growth prospects.

Harvey Norman (HVN)

Another household name, this multinational furniture, bedding, computer, and consumer electrical retailer is on track to distribute around 25 cents per share to shareholders during FY16.

The 5.5 per cent dividend is fully franked, and the company offers an attractive mix of capital growth and income.

Stockland Group (SGP)

Stockland is a diversified property development company that has business in shopping centres, housing estates, industrial estates and retirement villages.

Along with steady capital growth over the past 5 years, investors also receive a reliable, semi-annual dividend yield of over 5 per cent.

Wesfarmers (WES)

The key word when it comes to this well known blue chip is diversification.

Operating since 1914, Wesfarmers is one of Australias oldest and largest employers with interests ranging from retail (think Coles, Bunnings, Target and others) all the way through to the industrial sector.

Despite flagging writedowns in the Target brand and its coal mines, Wesfarmers wide range of assets should protect revenues and help them maintain a consistent dividend. The current fully franked yield sits at around 5.1%.

Sonic Healthcare (SHL)

SHL is a Sydney-based medical company that provides laboratory pathology and radiology services. It shows great potential for increased dividends and a healthy outlook for growth.

A well-positioned company with potential to increase its dividend yield and a favourable long-term outlook make SHL a solid dividend play, says Simon Hermann.

Of course, these are just some of the dividend plays available on the ASX, and there are many others. As with any investment, before jumping in with both feet its important to carefully review your goals, risk profile and investing time frame to ensure its right for you.

If in doubt, weve always believed the best investment is good advice.