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3 ASX50 stocks with yields over 7%

Credit: NAB

Blue chip businesses are seen as the most dependable and reliable on the ASX. They are the biggest and least likely to fail.

The big blue chips have already done most of their growth so they don’t need to retain much in the way of earnings for future years, this allows them to pay out a large percentage of their profits as a dividend.

The following three blue chips all have trailing dividend yields of above 7%:

Suncorp Group Ltd (ASX: SUN)

Suncorp is one of Australia’s insurance and banking giants with a market capitalisation of $18 billion.

It has a number of well-known brands including AAMI, Bingle and Terri Sheer. This multi-pronged approach allows Suncorp to market to all segments of the insurance market.

Suncorp is trading at 16x FY17’s estimated earnings with a grossed-up dividend yield of 7.19%.

National Australia Bank Ltd. (ASX: NAB)

NAB is one of Australia’s big four banks with a market capitalisation of $91 billion.

It might be a safer bank now that it has sold off most of its overseas operations. The housing market’s strength continues to confound year after year, which boosts NAB’s bottom line.

NAB is trading at 14.3x FY17’s estimated earnings with a grossed-up dividend yield of 8.32%.

Telstra Corporation Ltd (ASX: TLS)

This telecommunications giant has a market capitalisation of $50.7 billion. It also has a whole host of smaller issues which add up to a big problem.

It has struggled to grow earnings over the last decade, it has a payout ratio of over 100%, it’s planning to spend billions over the next few years on capital expenditure and TPG Telecom Ltd (ASX: TPG) will soon be launching a mobile network to challenge Telstra.

All of the above reasons are why Telstra shares are now trading at 13x FY17’s estimated earnings with a grossed-up dividend yield of 10.4%.

Foolish takeaway

Although all three of these businesses have attractive dividend yields, I wouldn’t want to buy any of them at the current prices.

The key to beating the potential returns of indices here and overseas is investing in growing businesses at attractive prices. I wouldn’t invest in Telstra, NAB or Suncorp today.

I'd rather invest in fast-growing businesses like this one.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of National Australia Bank Limited and Telstra Limited. Motley Fool contributor Tristan Harrison has no position in any stocks mentioned. The Motley Fool Australia owns shares of TPG Telecom Limited. 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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