Income investors will have a tougher time in 2014. A steady official cash rate for most of this year, despite firming inflation, will reduce real returns from term deposits. And popular dividend stocks, such as the Big Four banks and Telstra, look fully priced after stellar gains last year.
As a result, investors will have to look beyond the obvious income stocks and take slightly higher risk to maintain yields above 6%. One option is mid-cap stocks that are reasonably priced and offer sustainable yield.
Conservative investors, of course, should stick to blue chips for dividend yield. Those who can tolerate a bit more risk, and are willing to venture beyond the ASX 100, will find mid-cap stocks are not always only about growth. Some provide a useful mix of income and growth for self managed super funds.