High dividend-yielding stocks make up the bulk of many Australian investors’ portfolios and why not? Capital gains tax exemptions are in place for long-term buy and hold investing, franking credits boost the value of dividends, and modest earnings growth can be expected from many of the blue-chip stocks on offer.
There is one blue-chip company which pays a fully franked dividend and surprised investors and analysts alike when a payout was declared which was well above expectations. That came from the troubled mining giant Rio Tinto Limited (ASX: RIO). As a result it now trades on a dividend yield of 3.1% and is in the process of rebuilding its share price.
Rio’s bumpy growth profile is contrasted against the slow but sure earnings of Santos Limited (ASX: STO). Its share price has been in a holding pattern as investors eagerly await higher production levels stemming from the development of PNG LNG (due for completion in 2014) and Gladstone LNG (2015). It pays a 2.1% dividend.
For a top dividend idea it’s hard to go past Telstra Corporation Ltd (ASX: TLS). Its growing cash flow and modest earnings make it one of the best dividend payers on the ASX. Its international and NAS business divisions continue to show exceptional signs of long-term growth.
At the opposite end of the spectrum, investors have been balking at Coca-Cola Amatil’s (ASX: CCL) shares as the company reported weaker than expected earnings stemming largely from its purchase of SPC Ardmona and the price war with Schweppes. Nevertheless, the setback in price could provide the perfect opportunity for investors to bag-a-bargain. It currently yields 5.1% with 75% franking.
Lastly, shopping centre operator Westfield Group (ASX: WDC) is preparing to separate the company’s domestic operations from the international assets. It provides great exposure to the recovering US economy via its expansive network of properties. The company currently pays out a 4.9% dividend which is partly franked.
These five companies can be expected to continue growing earnings at a reasonable rate for a long time. They could make the perfect addition to a portfolio for any investor searching for a top-up of core stocks. At current prices, I believe Coca-Cola Amatil looks most likely to outperform the market.