High-yield shares are a haven in the storm
A HANDFUL of stocks stood out yesterday as the Australian sharemarket absorbed more bad news about Europe, employment rates in the US and weaker manufacturing in China.
A HANDFUL of stocks stood out yesterday as the Australian sharemarket absorbed more bad news about Europe, employment rates in the US and weaker manufacturing in China.Amid the sea of red were a few green numbers mostly stocks with high yields that were unlikely to be affected by a slowdown in global growth.A 2? gain in Telstra's share price was enough to make telecommunications the only positive sector yesterday. Telstra shares closed at $3.66, but reached $3.68 during trading its highest intraday level since May 15. Trading volumes were unusually high.RBS private client adviser Simon Ferguson said clients were selling any speculative holdings they might still have, shares in miners and shares in mining-related companies and buying sturdy high-yielding shares instead.Telstra has a yield of nearly 11 per cent and the management has guaranteed a fully franked 28? dividend for this and next financial year."That yield is looking far more attractive in a falling interest rate environment," Mr Ferguson said. "[Telstra] could go up to $4 and still be on a higher yield than comparative companies."The Reserve Bank board will meet this afternoon and is expected to cut the official cash rate by at least 25 basis points to 3.5 per cent, the lowest since November 2009.Telstra shares have been trading at two-year highs since chief executive David Thodey announced it would have between $2 billion and $3 billion in excess free cash flow over the next three years from its deal with NBN Co.Other high-yielding stocks outperformed the S&P/ASX 200 yesterday, according to Aberdeen Asset Management portfolio manager Michelle Lopez."Stocks like Telstra, like utilities, they are steady cash-flow generators [and] are always going to be more attractive," Mrs Lopez said.Tatts Group has a yield of 12 per cent and its shares rose 7? to $2.60 yesterday, gaining 1.1 per cent.And electricity provider SP Ausnet closed 0.5 per cent higher, while the the market as a whole fell 1.9 per cent. SP Ausnet has a 12-month yield of about 8 per cent and has 90 per cent of its cash flow guaranteed through regulation, according to Mrs Lopez.
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