We're not the only ones who believe the big banks won't continue to grow at the same pace in 2014. Although they pay great dividends, a share price fall in the next 12 months could completely wipe-out any benefit from a fully franked payout. For that reason, this list of top dividend stocks only includes those that I believe are trading at reasonable prices, yet offer a potential upside and pay a great dividend.
I'm not saying bank share prices won't climb higher in the next year, because a lower interest rate in 2014 will certainly bode well for all blue chip dividend stocks, but I am saying there are less expensive companies to invest in. One stock, which coincidentally has outperformed both the banks and the S&P/ASX200 (ASX: XJO) (^AXJO) in the past three years is Telstra (ASX: TLS).
Telstra's dominance in the Australian mobile and fixed internet markets will see its services remain in demand for years to come. In addition its lucrative contract with the NBN Co makes it more likely than not that a higher dividend will be paid out to shareholders in the next two years.
This year, special dividends were the talk of the town and Woodside's (ASX: WPL) payout was a standout. Woodside has recently announced a reduction in capital expenditure and will grow oil production to between 86 and 93 million barrels in 2014 – which provides scope for increasing its dividend.
Consistently high dividend yields usually come from industrial stocks, particularly those which have a large holding of fixed income assets like property. Real Estate Investment Trusts are likely to pay a constant income stream. Two growing businesses that provide very good yields are BWP Trust (ASX: BWP) – a commercial real estate holding company who leases its properties to Bunnings Warehouse – and Westfield Group (ASX: WDC).
Lastly, my favourite small-cap income idea is Cash Converters (ASX: CCV). Cash Converters announced today that it has acquired four more Australian stores – three in Victoria and one in New South Wales – taking the total number of domestic stores to 61 and UK stores currently count to 63.
Foolish takeaway
The dividends of these stocks are quite impressive and they each offer a healthy upside for capital gains. Here's the numbers:
Telstra: 5.7% fully franked.
Cash Converters: 5.1% fully franked.
Woodside: 4.7% fully franked.
BWP Trust: 6.6%.
Westfield: 4.9%.
