Yields eclipsing term deposit rates
With yields on equities rivalling bank term deposit rates, the Australian share market is looking attractive as a long-term investment.
"The Australian market as a whole provides a significant dividend investment play - a dividend yield of about 5 per cent," said Fidelity head of Australian equities Paul Taylor. "Some individual stocks obviously offer even more."
The ASX200 Accumulation Index dividend yield of 5 per cent was edging closer to the average term deposit rate for two years of 5.7 per cent, Taylor said.
He added that due do recent volatility, the Australian market was sitting at about 10 times earnings.
"Traditionally the Australian market trades at closer to 14-15 [times earnings]. While I don't think the Australian market is going to go from 10 back up to 14-15 anytime soon, I think maybe we stay at that 10-11 and returns come from the dividends that get paid, as well as the earnings growth in the market," Taylor said.
BNY Mellon Asset Management Australia managing director Bruce Murphy agreed that the banks in particular looked like a good buy, since their stocks were offering higher yields than the banks themselves were offering their customers in term deposits.
"You can buy banks at a 10 per cent yield at the moment, and that seems like a great deal. It's a volatile market, but it's a stock picker's market [since] markets are probably going to go sideways for a while."
It isn't only Australia that is looking like a good long-term investment, according to BNY Mellon Asset Management Asia Pacific chief executive Alan Harden.
"The markets present pretty good value. In most places now - certainly in the US and here - you're getting a better yield on equities than you are on 10-year bonds," he said.
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