Is this the best stock to dump $5,000 on?

Dividends, growth, great management and a blue-chip stock to boot. What more could you want?

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If you want growth and dividends, and the relative safety of a big blue chip stock, then Insurance Australia Group Limited (ASX: IAG) could just be the best place to put your $5,000 to work.

Despite today's price rise of 1.6%, IAG is still paying a trailing fully franked dividend yield of 6.2%, that's 8.8% grossed up!

And shareholders could be in for a bonus, after the company today announced that it expects to report an insurance margin of between 18% to 18.3%, well above the previously flagged range of 14.5% to 16.5%. Much of that is thanks to moderate weather and a lack of insurance claims in Australia over the past 12 months. Investors could see similar upgrades from our other listed insurers, QBE Insurance Group Ltd (ASX: QBE) and Suncorp Group Ltd (ASX: SUN).

IAG also benefitted from the exit of the UK business last year, and favourable credit spreads. According to Fairfax media, it's the fifth consecutive time the insurer has upgraded its full year insurance margin.

Despite the positive news, IAG says it expects to report just 3% growth in revenues, at the lower end of the range of 3% to 5% the company had forecast in January this year. IAG says it reflects an ongoing relative absence of input cost pressures and associated need for premium rate increases.

The company also says it now expects to report an annualised pre-tax benefit of around $230 million from the integration of the Wesfarmers Limited (ASX: WES) insurance underwriting business, as well as one off pre-tax costs of $220 million over the next two years. IAG bought the business from Wesfarmers in 2013 for $1.85 billion. That acquisition should deliver some decent growth in the future.

With a solid dividend, strong growth ahead, a stable of well-known brands and a leading position in Australia's insurance industry, IAG is definitely one stock you might want to add to your watchlist.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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