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Insurance Australia Group Ltd and Woodside Petroleum Limited: 2 blue-chip stocks with yields above 5.9%

In the last several trading days, the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) has trailed back down, returning to levels reached in the September sell-off.

But if you are a buyer of stocks and not a seller, you want it to go as low as possible. On the flip side of that is increasing dividend yields. Think of your yield as your initial rate of return on a stock. A stock’s yield will change every day, but the yield you bought it at is locked in for that investment money. If the share price goes nowhere, at least you have that rate of return.

That’s why blue-chips are so valued and loved by Fools everywhere. They are stable payers year in and year out and even raise dividend payments gradually over time.

Here are two large-cap blue-chip stocks with yields over 5.9% that could fit well in your income portfolio.

—   Insurance Australia Group Ltd (ASX: IAG)

The general insurer has benefited from milder weather and lower claims volumes in recent years despite the recent Brisbane storm. Its latest announcement estimated the net claims cost on 4 December to be around $140 – $170 million. It has a natural peril allowance of up to $700 million for FY 2015, with reinsurance coverage of $150 million in excess of $700 million of natural perils for that period. It seems to be adequately protected at this time and the share price hasn’t sold off heavily from the storm damage.

The stock pays a 6.2% yield fully franked. Business and gross written premiums are expected to rise in FY 2015 after it acquired the insurance underwriting business of Wesfarmers Ltd (ASX: WES) earlier this year. If no other large-scale natural disasters happen in FY 2015, the second half should be solid.

—   Woodside Petroleum Limited (ASX: WPL)

The energy giant is in an interesting and, in some ways, enviable position now. Its share price is getting punished like all the other oil and gas companies thanks to the huge sell-off in oil. The stock is down around $34.40, well down from $44 back in late September. If you were waiting for a better entry point, this may be it. Its yield is an enormous 6.9% fully franked.

The company is also cashed up and looking for acquisitions to fill its production development pipeline. Falling oil prices are bringing down the valuations of competitors and investment opportunities. As everyone knows, when markets sell off, cash is king. It may buy the Wheatstone LNG project stake owned by US-based Apache Corporation (NYSE: APA) soon. The 40% drop in Brent crude price may allow Woodside to pick it up on much more favourable terms. Oil could drop further and stay low, so you need a long-term view for Woodside. Still, it could be a stable dividend income stock for your portfolio, which is why I like it.

These 3 stocks could be the next big movers in 2020

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*Returns as of 6/8/2020

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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