While equity markets are reaching new heights, bond yield around the world are moving lower. Germany is on the verge of joining Japan and Switzerland in having 10 year bonds which yield less than zero.
Given bond yields are at such low levels around the world, it is forcing many investors to buy equity’s, in our view. In particular, higher dividend paying stocks are being supported as investors “hunt for yield”. Given bond yields are low, in order to generate income many investors are opting to buy dividend paying stocks as an alternative income stream, and we believe this trend is only set to continue as interest rates remain low in Australia and New Zealand. As such, across our Australian and NZ portfolios we have a number of selected high dividend paying stocks, which should be supported by investors in a low rate environment. Particularly in the NZ market, where market valuations appear stretched, we believe dividend return will be more important for the year ahead given the likely lack of further share price appreciation.
In saying that, investors should not simply blindly invest in the highest dividend paying stocks. A company’s fundamentals and earnings drivers must also be assessed, in particular in relation to dividend sustainability.
Keeping this in mind our top 6 dividend stock ideas across AU/NZ are:
Spark (SPK.NZ / SPK.AX) Telstra (TLS.AX)
PGG Wrightson (PGW.NZ) Generation Healthcare REIT (GHC.AX)
Tourism Holdings (THL.NZ) Ardent Leisure (AAD.AX)
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