AMP Limited vs. Suncorp Group Ltd: Which is the better dividend stock?

With the news wires running hot today with details of the action overnight in the US which saw chairwoman Janet Yellen of the US Federal Reserve reassure investors that the Fed would keep interest rates low for a ‘considerable time’ the demand by investors for high-yield alternatives looks set to continue.

Australian investors are certainly not immune from this scenario either given our Reserve Bank also has a low interest rate policy setting. The situation is particularly critical for retirees, many of whom are reliant on a steady stream of income from their superannuation savings to fund their day-to-day living expenses.

Two stocks which are no doubt popular amongst self-managed super fund (SMSF) investors are AMP Limited (ASX: AMP) and Suncorp Group Ltd (ASX: SUN). With market capitalisations of $16.6 billion and $18.8 billion respectively both companies certainly fall into blue-chip territory.

More importantly, both companies also operate in the insurance, banking and financial services spaces, all of which are growing sectors. Their large customer bases also create diversity and should allow for earnings to be reliably forecast and steady distributions to be made.

Both stocks have recently traded ex-dividend. So based on forecasts which stock is trading on a higher forward rolling 12-month yield?

AMP operates its financial year on a calendar year basis. According to consensus data supplied by Morningstar, AMP is forecast to pay a final dividend of 13.5 cents per share (cps). On my estimations, with a current share price of $5.55 this implies a rolling partially franked yield of 4.9%.

In contrast, Suncorp is forecast to pay a full year dividend in FY 2015 of 93.2 cps, with the share price currently at $14.30 this implies a hefty fully franked yield of 6.5%

Sun shining for Suncorp shareholders

With a 1.6% higher yield plus the added benefit of full franking, Suncorp looks the better option of these two blue-chip stocks for income-seeking investors.

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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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