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Weak jobs data could put a rocket up these dividend stocks

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The ABS this morning reported that Australia’s unemployment rate jumped from 5.7% to 5.9% from January to February 2017 in news that suggests the Australian economy may require the support of lower borrowing rates for a long while yet.

The benchmark interest rate currently stands at 1.5% and today’s jobs data suggests it’s not moving higher anytime soon as the yield search remains on the agenda for Australian investors. As such blue-chip dividend shares will remain in high demand due to their defensive nature and steady cash payouts.

Below I name three that are likely to receive renewed investor support over 2017 if inflation fails to pick up on the back of recent rate cuts, or if jobs prints like today’s come in consistently weaker than expected.

Scentre Group Ltd (ASX: SCG) as the real estate property manager behind Australia and New Zealand’s Westfield shopping centres it is popular with dividend seekers due to its bricks-and-mortar security and reliable dividend payouts. This afternoon the stock has climbed 3% to $4.25 and offers a trailing dividend yield of 5%. The valuation is still a little on the expensive side for my liking, although I wouldn’t be surprised to see shares bid higher if Australia’s economy softens in 2017.

Telstra Corporation Ltd (ASX: TLS) is another big favourite with income seekers due to its yield and perceived security. Today the Telstra share price is up 1% to $4.74, which means it offers a big trailing yield of 6.54% plus the tax effective benefits of franking credits. Unfortunately, Telstra is now paying out more in dividends than it earns per share, which means its dividend payout may not prove sustainable.

In fact a high trailing yield from a blue chip company such as Telstra is often a sign that the market expects a dividend cut is in the pipeline.

Sydney Airport Holdings Ltd (ASX: SYD) is another business prized by investors for its monopoly like position and defensive earnings streams that support generous cash payouts to investors. Today the airport’s share price is up 1.5% to $6.25 as investors react to the US Fed’s guidance for base lending rate moves over 2017 and today’s jobs data.

Sydney Airport may perform reasonably well over the short term, but I expect in a rising cash rate environment the shares may come under selling pressure.

If you’re looking for a fully franked dividend share, it might be best to consider one on an attractive valuation that should be able to grow its dividends and profits strongly in the years ahead.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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