High dividends stocks the winners as interest rates slide

Share prices for utility stocks have pushed higher this week as investors search for better returns on the back of indications that the Reserve Bank could look to cut the official cash rate as its next move.

Previously the RBNZ has signalled that a rate change could be either up or down but that tune changed this week.

Term deposit rates have been cut in recent months by a number of banks and the RB's move could signal further cuts in what savers can get in the bank.

Shane Solly, a fund manager at Harbour Asset Management, predicted term deposit rates would fall with many looking to reinvest it into stable dividend paying stocks like utility companies.

One that has benefitted is telco Spark with its share price rising more than 7 per cent in the last week.

Mark Lister, head of wealth at Craigs Investment Partners, said the key reason for Spark's recent performance was down to expectations of interest rates remaining lower for longer, as well as a general desire from investors to focus on more defensive, predictable industries amidst the increasingly uncertain economic backdrop.

"All of the risks we are seeing (both domestically and offshore) have contributed to the Reserve Bank taking a much more cautious approach to monetary policy, and this has seen investors look for companies with above average dividend yields, that will also prove resilient should we enter a more challenging economic period."

The NZX 50 index is up 1.7 per cent this week and many of the top performers are companies with high dividend yields, he said.

Genesis Energy has been the top performer up 8.1 per cent.

Lister said Spark may have benefitted from earlier weak performance with its shares down around 5 per cent for the year so far compared to the NZX 50 which is up more than 10 per cent.

"I think Spark has attracted a bit of interest just recently on the back of expectations of lower interest rates, and also because it has lagged some of the other companies that pay attractive dividends," he added.