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These 6 stocks still offer 5% dividend yields

Low interest rates and a fully priced stock market are making it tough for income-seeking investors who rely on a steady stream of income from their savings.

A screen of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) shows that 53 stocks have trailing dividend yields of 5% or more based on Monday’s closing prices. However a trailing yield only tells investors what happened in the previous two halves; it doesn’t tell investors what they will receive in the future.

Of those 53 stocks there are a number of gold stocks and mining service stocks that will almost certainly be unable to pay the same level of dividends to shareholders in the current year as they did in the previous financial year. Importantly there are also a number of stocks that did not earn enough to fully cover what they paid out.

One sector represented within the S&P/ASX 200 Index that still offers a number of stocks with trailing dividend yields above 5% and have earnings that fully covered those payments is the real estate investment trust (REIT) sector.

1. Australand Property (ASX: ALZ), which has a focus on industrial properties, has a trailing yield of 5.4% and its dividend is covered by earnings 1.44 times.

2. BWP Trust (ASX: BWP) owns commercial real estate with a particular focus on properties leased to Bunnings Warehouse. Based on yesterday’s closing prices, BWP is trading on a 6.2% yield, with 1.5 times coverage of its dividend.

3. DEXUS Property Group (ASX: DXS) is currently manoeuvring for a takeover of Commonwealth Property Office Fund (ASX: CPS), which if successful could change its ability to maintain its dividend. However based on last year’s payout, DEXUS is trading on a dividend yield of 5.6% and with cover of 1 times.

4. Federation Centres (ASX: FDC) focuses on the ownership and management of around 70 shopping centres. The trailing yield is 5.8% and is fully covered by earnings.

5. Investa Office (ASX: IOF), as the name suggests, invests in office properties throughout eastern Australia and Perth. The current trailing dividend yield is 5.6% and it is comfortably covered 1.5 times.

6. Westfield Retail Trust (ASX: WRT) owns many iconic Westfield Shopping malls including Bondi Junction and Fountain Gate. The stock currently pays a 6.3% dividend yield which is 1.4 times covered by earnings.

Foolish takeaway

REITs generally benefit from steady revenues and with lease contracts that are often linked to increase at least by inflation. This provides relatively stable earnings for shareholders and can often give confidence that a payout level will be maintainable.

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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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