With interest rates stuck at a record low of 2.5%, demand for dividend stocks is stronger than ever. Whether you'rE investing inside of super or outside of it, dividend stocks could easily make up a bulk of your portfolio.
Here are five dividend stocks which deserve a spot on your watchlist and, depending on your risk tolerance and investing strategy, your portfolio.
Building contractor Leighton Holdings Limited (ASX: LEI) is one stock which I've been bullish on in the past 12 months. Despite a wrath of bad press from Fairfax Limited (ASX:FXJ) newspapers and concern over its level of gearing, it's still higher than when I recommended it for Foolish investors. In the time since, its profit has jumped 13%, gearing has been cut over 2%, its net profit margin has increased 0.6%, it announced a 60-cent final dividend and group revenue increased 6%. It currently yields 5.8% with 50% franking.
Another stock which shrugged off bearish forecasts to produce a good set of results and boost its dividend is Rio Tinto Limited (ASX: RIO). With the price of iron ore remaining strong and production rapidly increasing, Rio's cash flow is growing and debt is falling. It recently increased its dividend 15% giving it a full-year yield of 2.8% fully franked.
In the banking sphere, I believe Australia and New Zealand Banking Group (ASX: ANZ) has a strong and sustainable dividend. Although I'm not 100% convinced it's a bargain for new investors, its diversified earnings potential give it a leg-up on its domestically focused rivals and will enable it to pay a sustainable dividend for a long time. It currently yields 5.3% fully franked.
Today, supermarket heavyweight Woolworths Limited (ASX: WOW) announced impressive profit growth, although its troubled hardware and home improvement businesses continued to drag on earnings. Despite the short-term blemishes, Woolworths is a low-risk, high margin business, which should reward shareholders with modest growth and a growing 3.8% fully franked dividend.
In a similar predicament is Telstra Corporation Ltd (ASX: TLS). Some investors are growing wary of its Asian growth strategy and the fading revenues from fixed phone and data services which run on the company's 100-year-old copper networks. I'm bullish on Telstra's future with its high margin mobile and internet businesses, in addition to its Asian expansion. It currently yields 5.6% fully franked.
Foolish takeaway
Dividends are great. But worthless if a company cannot continue to pay them. As long-term investors it's imperative we find sustainable and growing business models which will enable management to declare robust dividend payments. If you want the Motley Fool's opinion of Telstra shares you can get it for free just click here! Or if your thinking of buying bank shares, get a free copy of our latest report on the big 4 banks here.
