3 dividend stocks I'd buy before Telstra Corporation Ltd

Myer Holdings Ltd (ASX:MYR), Seven Group Holdings Ltd (ASX:SVW) and Insurance Australia Group Ltd (ASX:IAG) are all above Telstra on my list of top dividend stocks.

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Australia's love affair with leading telco Telstra Corporation Ltd (ASX: TLS) shows no sign of slowing with investors bidding the company's share price up to a brand new 52-week high of $5.77 last week.

It's a mighty price and as a result of the share price rise, Telstra's fully franked dividend yield has been squeezed to 5.2% – based on the FY 2015 forecast pay-out of 30 cents per share (cps).

Admittedly, it is still an appealing yield but the earnings growth profile of this telco giant is relatively low compared to a number of alternative opportunities, as such share price and dividend growth may not be that exciting in the future.

Here are three stocks I'd buy before Telstra not just because they offer high yields but also because the potential for increased dividends, earnings growth and capital gains looks higher too.

Myer Holdings Ltd (ASX: MYR)despite operating in the cut-throat discretionary retail industry it seems reasonable to assume that Australia can house two profitable, upmarket department store chains. The recent acquisition of David Jones proves there is still an appetite for the sector and with Myer forecast to maintain a dividend at 14.5 cps in FY 2016, investors are set to enjoy a fully franked yield of 7.7%.

At the same time, owning a stock that is trading near its all-time low, but which could see gains not only from corporate activity but also a general upturn in the retail environment gives this stock appealing upside potential.

Seven Group Holdings Ltd (ASX: SVW) – has an exclusive license to distribute Caterpillar-branded heavy earth moving equipment throughout most of Australia and parts of China coupled with a major shareholding in Seven West Media Ltd (ASX: SWM), which gives shareholders some impressive assets. With the company's 40 cps dividend seen as secure, investors can currently enjoy a fully franked divided of 5.8% while they wait for a rebound in mining equipment sales and service levels.

Insurance Australia Group Ltd (ASX: IAG) – one thing that is inherent amongst insurance companies is a lumpiness to their earnings. In IAG's case this appears to flow through to its dividend as well, with analyst consensus data (provided by Morningstar) forecasting a small decline in the pay-out over the next two years. Even on the lower FY 2016 forecast dividend of 37.2 cps, shareholders are still set to enjoy a fully franked yield of 5.7%.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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