Commonwealth Bank of Australia (ASX: CBA) has for a long time been amongst the market's most popular stocks, but since its recent earnings update, investors are now thinking twice before buying its shares.
Unlike its rivals, which all produced half-year reports last week, Commonwealth Bank was reporting on its third quarter results and was thus required to disclose less information. Still, the information that the bank did choose to present has left investors feeling underwhelmed.
In fact, the stock plummeted a whopping 5.9% on Wednesday – its biggest fall since the days of the Global Financial Crisis – after the bank reported a decline in net profit for the quarter – from $2.3 billion to $2.2 billion – in addition to higher expenses, a contracting net interest margin and only a small decline in bad debt charges.
Indeed, investors should have realised by now that the bank is by no means the solid investment that it once was. It seems that the market has finally clued onto the fact that the bank's record earnings growth cannot continue in the long term, while there is also the risk that its dividend growth could also come to an abrupt halt.
As such, it's clear that Commonwealth Bank is no longer the easy answer for reliable dividends.
Here are two great dividend stocks I'd buy before Commonwealth Bank of Australia.
- Woolworths Limited (ASX: WOW) recent struggles have been well documented and while its lacklustre growth is certainly a concern, management has devised a plan to return the retail behemoth to solid growth. While the near-term outlook for the retailer remains cloudy, its recent fall is offering long-term investors an incredible buying opportunity. At $27.80, the shares are trading on a fully franked dividend yield of 5%, which equates to 7.1% when grossed up.
- Coca-Cola Amatil Ltd (ASX: CCL) has also experienced a two-year stretch that most shareholders would prefer to forget, but by all accounts management appears to have steadied the ship. The shares are once again on the rise and a return to earnings per share growth is expected as of this financial year. While this turnaround could yield solid capital gains, investors who buy today can also take advantage of the stock's 4.1% dividend yield (partially franked).
While Woolworths and Coca-Cola Amatil both represent fantastic buying opportunities, there's another ASX dividend stock that could be an even greater purchase today.
