3 blue-chip stocks with dividend yields over 5%

After a tough September, it appears the ASX – and its dividend stocks in particular – are once again, in vogue.

And why wouldn’t they be…

The share prices of some of our favourite stocks are down by high-single digit percentages, or even double digits, in just one month.

Which means, better dividend yields.

All the while, interest rates on term deposits and savings accounts continue to disappoint, especially when we consider inflation is a lofty 3%.

With that in mind, here are three stocks with big dividend yields to add to your watchlist today…

1. Australia and New Zealand Banking Group (ASX: ANZ) is currently trading on a forecast dividend yield of 7.7% grossed up. The bank is continuing to grow its exposure to Asian markets via the rollout of its ‘Super Regional Strategy’ and analysts are expecting strong growth in the next three years. This will likely support a higher share price, in time.

2. Rio Tinto Limited (ASX: RIO) is expected to pay a dividend of around $2.38 per share, in the coming year. This places the stock on a grossed-up dividend yield of 5.6% at today’s levels. However, thanks to a falling iron ore price, earnings per share will drop in the coming year. In the long term, given the miner derives 92% of earnings from iron ore, a sustained lull in spot prices may change management’s willingness to pay increased dividends to shareholders.

3. Macquarie Group Ltd (ASX: MQG) offers a partially franked payout. Forecasts place it on an equivalent yield of 5.8% grossed-up. This is a result of the significant earnings it derives overseas (where it cannot collect franking credits). However, the investment bank’s international exposure is likely to boost earnings in the coming years, as US and European markets continue to perform strongly.

Buy, Hold, or Sell

Despite the likelihood of increased earnings in the near term, at today’s prices, I think Macquarie Group and ANZ trade at a price slightly higher than I’d be willing to pay. However, Rio (and other iron ore miners) continues to face a number of headwinds moving forward and therefore they are not a good choice for risk-averse investors.

But I'm not waiting around for ANZ or Macquarie to drop in value. In fact The Motley Fool's top analyst, Scott Phillips, recently identified one cheap but growing ASX stock with a 4.5% grossed-up dividend yield which I think is a STANDOUT buy today.

Simply click here, enter your email address and we'll send you a free copy of his report!

Motley Fool Contributor Owen Raszkiewicz is long December 2017 $48 warrants in Rio Tinto. 

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