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4 retirement stocks with 5% dividends

After years of hard work, many of us will want a reliable retirement income stream to help us live out the life we’ve always wanted. Property rentals are one option but are time consuming and, for the most part, yield considerably less than stocks in stable blue-chip companies.

However, in the current low interest environment, the share prices of many well-known dividend payers have appreciated significantly. This has made finding good investments more difficult and decreases the most popular stocks’ yield. Importantly, investors who buy in at such high levels also run the risk of overpaying for shares.

You only have to look as far as Coca-Cola Amatil Ltd’s (ASX: CCL) 22% share price fall or Rio Tinto Limited’s (ASX: RIO) 12% dip, in the past six months, to know how devastating the losses can be if you pick the wrong blue-chip stocks.

However investment bank Macquarie Group Ltd (ASX: MQG) is at the opposite end of the spectrum and has been busy returning excess funds to shareholders, in addition to the 6.5% increase in share price so far in 2014. I think in the long term it’ll continue to reward faithful shareholders with modest capital gains and dividends. In the next year it is forecast to pay a 5% dividend with partial franking.

Another high-yielding ASX blue-chip is Telstra Corporation Ltd (ASX: TLS). It is forecast to pay a strong 5.5% fully franked dividend in the next year. However with free cash flow forecast to reach $7 billion this year coupled with ongoing growth in Asia, its payout is likely to grow.

Of the big banks, Australia and New Zealand Banking Group (ASX: ANZ) is most rapidly growing earnings thanks to its heavy focus on Asia and continued growth in Australia’s mortgage and business banking markets. It is forecast to pay a dividend of $1.76 in the next year, putting it on a prospective dividend yield of 5.4% fully franked.

Insurance Australia Group Limited  (ASX: IAG) is also focusing on growing earnings in Asia and is forecast to pay a 6.1% dividend fully franked in the coming 12 months. While insurers are inherently risky, I believe it’s likely to reward shareholders investing for the long term.

Our #1 ASX dividend stock is here!

Whilst these four businesses are renowned for their great dividend payments, they command lofty share prices and might have some of you worried about their valuations. Instead, some investors (like me) are concentrating on finding rapidly growing small-cap dividend stocks.

For example, our top analyst recently gave one stock his tick of approval when he titled it, "The Motley Fool's Top Dividend Stock for 2014 - 2015." It's a growing small-cap you need to have on your watchlist, at least!Best of all: Get it free today in our new investment report! Just click here to download your free copy of "The Motley Fool's Top Dividend Stock for 2014-2015".

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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