Building your portfolio with a strong base of dividend earning companies brings the advantage of the regular cashflows and choice of how that money is used.
But that doesn't mean you need to restrict yourself to the same big blue-chip stocks traditionally held from the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). In fact there are likely even better options out there for investor returns. Here are three alternatives to popular big dividend stocks to consider buying today:
1. Instead of Woodside Petroleum Limited (ASX: WPL) buy Santos Ltd (ASX: STO).
Woodside has become a dividend favourite in the last 12 months as the cash pours in from oil and gas. The company's 5% dividend yield is certainly attractive, but Woodside appears to be nearing the apex of its production. Santos on the other hand is expected to grow its dividend rapidly over the next five years from its current 2% yield today as additional production comes online and capital expenditure slows.
2. Instead of Telstra Corporation Ltd (ASX: TLS) buy Telecom Corporation New Zealand Limited (ASX: TEL).
Telecom NZ, soon to change its name to 'Spark', is a big fish in the small New Zealand telco pond. The new name signals a new phase for the telco focusing on the increasing use of data and leveraging its dominance in mobile and internet, away from its traditional fixed-line revenues. Telecom's dividend yields 5.5% and comes with the benefit of geographic diversification.
3. Instead of AMP Limited (ASX: AMP) buy Insurance Australia Group Limited (ASX: IAG).
Insurance group, IAG, yields over 6%, well ahead of AMP's 4.2%, with the bonus of being a growing company. The company this year gained approval to acquire Wesfarmers Ltd's (ASX: WES) insurance underwriting businesses for $1.845 billion.
Another alternative to consider is small-cap insurance distributor Calliden Group Limited (ASX: CIX). The company trades at a smooth p/e ratio of 13 and has a trailing dividend yield over 6%.
