The investment outlook is considerably improved by recent events. The ECB head, Mario Draghi, has come up with a viable plan for Europe, and the US Fed is embarking on a third round of asset purchases. While caution is still warranted, investors are increasingly edging back into the market. So, what to buy?
The answer is different for every investor. Not only will it depend on age, available capital and risk appetite, existing exposures are an important consideration. But for those investors underweight banks or Telstra, the dividend yields may still be a compelling argument. Here’s an updated table:
The estimates of future bank dividends factor growth of 3% – and no growth for Telstra. In my mind these are conservative estimates, with upside risk.
Nevertheless, when compared to deposit and bond rates, they may represent a good reason to take on the additional risk of investing in shares, particularly as that risk could see share prices rise as well as fall. And of course, many investors with an outlook of one year or more will view the dividend flow as a way to “ride out” share price fluctuations.