Last week’s fall in the cash rate to a record low of 2% has ramped up the pressure on income-focussed investors. Cash-heavy self-managed superannuation funds (SMSFs) face the very real risk that they may not be generating sufficient income to cover compliance and administration costs. Many retired SMSF owners have a different problem – to meet the minimum pension drawdown rules, they could be forced to start to eat into their capital.

Investors like these need yield. The interest-rate cut is only going to intensify the flow of SMSF money looking for income in the share market.

The hunt

There, of course, investors bear ever-present market risk. But the share market still represents a very alluring yield prospect; augmented, in many cases, by the reasonable expectation of capital growth.

For example, using the consensus of analysts’ forecasts collated by FN Arena, the traditional sources of SMSF equities income, the big four banks, currently offer FY16 forecast yields in the range of 5.1%–5.7%.

With the partial rebate of unused franking credits to an SMSF in accumulation phase, that yield range effectively represents a yield to the SMSF of 6.2%–6.9%.

In pension phase, with full rebate of franking credits, the big banks’ effective yield range becomes 7.3%–8.1%.

Among other yield favourites, Telstra is currently priced at a 5.2% expected FY16 yield on analysts’ consensus forecasts – but simultaneously is viewed as trading 6.8% above the target price.

The alternatives

Around the ASX200, there are higher yields than these on offer – with two big caveats. The first is that expectations are precisely that. The second is that dividend yields move inversely to a share price, meaning that in some cases, yields have risen significantly because the share prices have slumped.

(A high expected dividend yield can imply that the share price is at risk – that the share price would have to fall to bring the yield down closer to the market average. Alternatively, a high forecast dividend yield could imply that the dividend is likely to be cut, which would also bring the yield down.)

An investor can find some situations where a share price fall has opened up an attractive yield, but the bad news is fully discounted in the share price, and the business outlook is reasonably strong. These situations can potentially be used to add some spice to the overall portfolio yield, especially if the view of the analysts who follow the stock implies that the stock offers some value.

Here are four such potentially lucrative dividend yield situations, on the back of share price falls, with extra gain from possible share price recovery:

Genworth Mortgage Insurance Australia (GMA, $3.16)

Forecast FY16 yield 11.4%, fully franked
16.9% Upside to consensus target price

Mortgage insurer Genworth, which was floated by its US parent in April 2014, handles 44% of the local market in insuring home loans with high loan-to-valuation (LVR) ratios. In the six months to December 2014 GMA reported a 51% rise in statutory net profit, to $172.7 million, and declared a fully franked final dividend of 13.1 cents, and a fully franked special dividend of 11.5c, for a combined 24.6 cents a share.

Source: Yahoo!7 Finance, 11 May 2015

From its $2.65 float price, Genworth surged to $4.32 in February, but then got hammered when one of its biggest customers, Westpac – source of 14.1% of gross written premium in 2014 – took its business elsewhere. The share price lost 23% to $3.32 and has not recovered. But where that price fall can work for investors is that at its quarterly update, Genworth pointed to an ongoing strong operating performance and the potential to return around 80 cents a share to shareholders over and above the expected dividend, over the next 12 months. In particular, brokers Macquarie and UBS are fans of the stock.

Skilled Group (SKE, $1.255)

Forecast FY16 yield 9.6%, fully franked
37.6% Upside to consensus target price

Labour hire company Skilled has plenty of headwinds in the form of weak demand, soft resources markets and structural changes in the workforce services division. But it satisfied most brokers with its first-half result, with strong performances coming from its technical professionals and engineering and marine divisions. Skilled received a $700 million “merger of equals” offer from rival workforce provider Programmed Maintenance Services (PRG) in December, but Skilled dismissed the offer, and there has been little discussion since. The share price has more than halved in the last 12 months, but the dividend expectation has held up: if the risks to the outlook are now fully factored in to the share price, the value is there.

Source: Yahoo!7 Finance, 11 May 2015

MMA Offshore (MRM, $0.635)

Forecast FY16 yield 8.5%, fully franked
22.6% Upside to consensus target price

One of the largest marine service providers to the oil and gas industry in the Asia Pacific region, MMA Offshore (MRM) is another stock that has been hammered by a share market concerned at deteriorating trading conditions. MRM is down 73% since August 2014. While the FY15 result is likely to be flat at best, the acquisition of Singaporean group Jaya last year improved MMA Offshore’s Asian position, and this could also be a situation where the near-term outlook has been fully factored in to the share price. Dividend expectations have come down from 12.5 cents (actual FY14) to 5.4 cents (forecast FY16), but on the share price fall, that would deliver 8.5%.

Source: Yahoo!7 Finance, 11 May 2015

Seven West Media (SWM, $1.225)

Forecast FY16 yield 7.6%, fully franked
30.3% Upside to consensus target price

Media group Seven West Media owns the Seven Network, Pacific Magazines, The West Australian, Presto and Yahoo!7. The print businesses have struggled, dragging down earnings, and the half-year result fell short of expectations. But Seven West expects TV to deliver a recovery in the second half of FY15. The share price has fallen by 40% since August. Seven confirmed it will maintain its dividend at 12 cents in FY15 and even very conservative consensus estimates of 8.9 cents a share in FY16 generate a forecast yield of 7.2%, with scope for improvement on a recovering advertising market.

Source: Yahoo!7 Finance, 11 May 2015

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.