Dividend payments from blue-clip Australian stocks make for a fantastic income stream. Unlike companies in other countries, many of our biggest and best dividend stocks pay distributions which come loaded with franking credits. That means, investors receive credits on their personal tax returns for payments already paid to the Australian Tax Office by the company they are a shareholder of.
Telstra Corporation Ltd (ASX: TLS) and Commonwealth Bank of Australia (ASX: CBA) are some of the most popular income stocks in the S&P/ASX200 Index (ASX: XJO) (INDEX: ^AXJO) because they pay fully franked dividends (denoting a tax credit of 30% on distributions paid). However there are a number of other companies with significantly higher dividend yields than these two available to us.
Here are three big dividend payers you should keep on your watchlist.
1. National Australia Bank Ltd. (ASX: NAB) is forecast to pay a 5.97% fully franked dividend (8.5% grossed-up). However despite boasting the biggest dividend yield, NAB has consistently underperformed its major bank rivals in terms of share price appreciation over the past decade. Unfortunately, it looks set to continue. As such, until it can sort out its mess in the UK, it's best kept on your watchlist.
2. Insurance Australia Group Limited (ASX: IAG) is the owner of insurers such as NRMA Insurance, CGU, SGIO and SGIC. Despite big increases in earnings per share in recent times and share price gains to match, IAG's shares still trade on a forecast dividend yield of 5.9% fully franked.
3. Cromwell Property Group (ASX: CMW) may not pay a fully franked return but its forecast 7.5% unfranked dividend provides a viable alternative to low interest rates. What's more, earnings per share are expected to rise over 10% in the coming year.
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Each of these three companies operate established businesses with strong brand recognition. However, currently, I'm not planning on buying any of them because there are other, faster growing, ASX dividend stocks trading at discounted prices which are offering up a much more compelling investment opportunity.
