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5 dividend stocks I’d buy with $5,000 today

A large portion of the returns that the share market has returned over the last several decades have been the dividends the companies have paid out.

Dividend paying stocks are a good sign that the company is making profits and growing dividends suggest growing profits.

Dividends paid by companies are particularly useful for Australians because of the franking credits that come with them.

In this era of low interest term deposits, here are five stocks with grossed up dividend yields over 5.5%:

Australian Foundation Investment Co. Ltd. (ASX: AFI) (AFIC) is Australia’s largest listed investment company managing around $6 billion of funds. It’s been around since 1928 and has been one of the most reliable dividend payers over the last decade.

In FY16 it grew its dividend by 4.34% and it’s currently trading with a grossed up dividend yield of 5.94%.

Blackmores Limited (ASX: BKL) has had a really turbulent time over 2016, shrinking from $220 per share to today’s $102.

I think there’s more growth to come from Blackmores because it’s rolling out more products and expanding into new countries, therefore the halving of the share price could be an opportunity.

Cromwell Group (ASX: CMW) is one of Australia’s strongly performing real estate investment trusts (REITs), focusing on leasing to government entities and large companies.

REITs are never going to be star growth stocks, but they can provide quite dependable income from the rents they collect.

Cromwell has a dividend yield of 8.68% and has increased its dividend every year since 2011.

G8 Education Ltd (ASX: GEM) is one of Australia’s largest childcare operators with around 500 centres in its portfolio.

It rapidly expanded by acquiring a large number of childcare centres and is slowly adding more. It does have a large amount of debt but as it slowly increases profits, it can cover the interest and repayments.

G8 has been paying 6c per share every quarter since January 2015 and is expected to keep doing so for a while to come. This means it’s trading with a grossed up dividend yield of 9.6% and is trading at 11.8x FY17’s estimated earnings.

Mortgage Choice Limited (ASX: MOC) is one of Australia’s largest independent brokers with a growing network of locations and loans.

It could have a bumper year in 2017 as more people refinance trying to get a better interest rate than the one they’re currently on.

Mortgage Choice is currently trading at 14.6x FY16 earnings with a grossed up dividend yield of 10.24%.

Foolish takeaway

I think all of the above stocks could provide good returns over the next couple of years. At the current prices the three I’d be most interested in are G8 Education, Mortgage Choice and AFIC.

If these five dividend stocks aren’t enough, you should consider these three stocks with large dividends.

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Tristan Harrison has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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