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6 stocks with 5% dividend yields

Many investors prefer to focus their attention on the larger end of the market where companies that are often leaders in their field and have more stable businesses usually cluster.

A review of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), which encompasses many of Australia’s leading stocks shows that there are still opportunities available for investors to purchase stocks that should provide them with dividend yields above 5%.

Stripping out mining and mining service stocks, whose ability to match last financials year’s earnings is murky at best (meaning their forward yields unlikely to be anywhere near as high as their reported trailing yields) — and also leaving aside the property sector, which has some high yielding candidates but doesn’t offer the same capital gains profile (for a review of property opportunities look here), there are still some appealing businesses with reasonable outlooks and maintainable dividend yields.

1. Automotive Holdings (ASX: AHE) is well positioned to continue to benefit from the desire of consumers for new cars. The stock is trading on a trailing dividend yield of 5.5% and with earnings that covered the dividend 1.3 times.

2. David Jones (ASX: DJS) had some good news to report to the market last week when it saw an uptick in sales. The firm is currently trading on a trailing yield of 5.6%, which is 1.3 times covered.

3. Myer (ASX: MYR), which is similarly exposed to the department store space as David Jones (ASX: DJS), is trading on an appealing 6.7% yield that is covered 1.2 times.

4. Southern Cross Media (ASX: SMX) had earnings coverage of 1.5 times its dividend last financial year and currently sells on a trailing dividend yield of 5.3%.

5. STW Communications (ASX: SGN) is a major provider of marketing and communications services in Australia. The stock currently trades on a yield of 5.5% and boasts 1.4 times dividend coverage.

6. Wotif (ASX: WTF) has fallen out of favour with the market, with many investors viewing the stock as “ex-growth”. While its future growth profile may have lost appeal for some, its trailing dividend yield of 5.3% fully covered may be appealing to income-seeking investors.

Foolish takeaway

Investors of course need to be forward looking, not backward looking. While trailing yields and interest cover can help to identify stocks of interest, it is an accurate analysis of the future that will determine returns to investors. The above stocks could be a good place to start for investors looking for industry-leading companies trading on 5% plus dividend yields.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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