A LIST of Australia's 10 most popular stocks shows retail investors face a difficult decision: they can accept lower rates of return from some of their favourite companies, or they can look for other stocks to invest in.
Telstra was the only stock on the list to see its share price go up, with popular stocks such as AMP, Westpac and Wesfarmers performing worse than the market in the past 12 months.
Telstra shares have risen more than 20 per cent in value in the past 12 months as investors welcomed the billions of dollars flowing from the telco's national broadband network deal on top of a dividend yield that reached 8 per cent last year. If you had bought in 12 months ago, as well as the share-price gains you would have got a double-digit yield based on the share price at that time.
Analysts have warned that the sectors to which the most popular stocks belong banking and finance, retail, and resources hold little prospect for immediate earnings growth.
"This is the old headache for retail investors," Bank of America Merrill Lynch chief equity strategist Tim Rocks said. "Overall the market's tough, but it has been tougher for retail investors because the big mature dividend-paying companies they tend to own have all done pretty badly, [some] worse than the market. The recent peak in commodity prices would make things harder for resource companies, adding to investor concern, while the banking sector remained under pressure from changes in the economy and the end of the leveraging cycle."
But offsetting falls in shares prices, some stocks had delivered reasonable dividends in the past 12 months, particularly banks.
"The deposit rates that the banks are offering have gone down, and if you can only get 4 to 5 per cent on bank deposits then a 7 or 8 per cent yield on some of these stocks still looks attractive," Mr Rocks said.
"[But] you've still got to accept that you're going to make your dividend yield but you're not going to make much else, [the stock's] not going to grow very strongly."
Coles will release its quarterly sales results today and is expected to beat rival Woolworths for the 11th consecutive quarter not that you would know from the share-price performance in the past year, with Coles parent Wesfarmers down double digits compared with Woolworths' more modest falls.
This performance is more an overall reflection on the Wesfarmers conglomerate, which has had trouble with its insurance and coal divisions. It is also increasing investment spending and not everyone is sure it will generate an acceptable return.