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Forget Commonwealth Bank of Australia and buy these dividend shares

Although I think Commonwealth Bank of Australia (ASX: CBA) is arguably the highest quality bank on the Australian market, I feel its shares are a touch overvalued at the moment.

In light of this, I would suggest income investors avoid the bank and consider these dividend shares instead:

Baby Bunting Group Ltd (ASX: BBN)

This baby products retailer’s shares have come under significant selling pressure this year due to its weak full-year guidance. Full-year profit is expected to be flat this year due to the impact of clearance sales from closing competitors. Whilst this is disappointing, it is worth remembering that these closures should ultimately lead to market share gains for Baby Bunting in the future.

Interestingly, CommBank and its related bodies have taken advantage of the sell-off by recently increasing their stake in the company from 5.8% to 6.9%. Baby Bunting’s shares provide a trailing fully franked 4.5% dividend.

Telstra Corporation Ltd (ASX: TLS)

Despite the telco giant cutting its FY 2018 dividend to 22 cents per share, its shares still provide one of the most generous yields on the Australian share market. At the current share price it works out to be a fully franked 6% yield, making it a great alternative to CommBank in my opinion.

While there are concerns over its future profitability when the NBN payments end, I’m optimistic that it will still be in a position to at least maintain this payout.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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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