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3 dividend stocks on my income watchlist

The share market has a lot of stocks that are trading with grossed-up yields above 5.5%, but not all of them are worthy of buying in my opinion.

That’s why I have a separate watchlist for all of the decent (or better) dividend stocks with pleasing yields. To me, a dividend stock is only good if it’s going to maintain or increase its income for shareholders, otherwise it’s a risky yield trap.

Here are three shares on that income watchlist:

Arena REIT No 1 (ASX: ARF)

Arena is one of Australia’s larger real estate investment trusts (REITs), it mainly owns childcare buildings and leases them to large childcare operator tenants like G8 Education Limited (ASX: GEM) and Goodstart Early Learning.

It’s benefiting from the growth of real estate prices and also the rising number of children needing childcare, the number of births is almost the highest it has been for many years.

I also like that the weighted average lease expiry (WALE) is currently 13.1 years, which is one of the longest in the industry.

It currently has a distribution yield of 5.58%.

Australian Foundation Investment Co. Ltd. (ASX: AFI) (AFIC)

AFIC is one of the oldest listed investment companies (LICs) on the ASX. It invests in all of the major blue chips of the Australian share market like Commonwealth Bank of Australia (ASX: CBA), Wesfarmers Ltd (ASX: WES) and Westpac Banking Group (ASX: WBC).

It aims to increase its dividend faster than inflation and it has managed to do that over the past 20 years.

It currently has a grossed-up dividend yield of 5.63%.

Clime Capital Limited (ASX: CAM)

Clime is another LIC, but it is much newer and aims to give investors diversification with Australian large caps, medium caps and small caps, as well as international shares.

Some of its top holdings include Ramsay Health Care Limited (ASX: RHC), Credit Corp Group Limited (ASX: CCP), Collins Foods Ltd (ASX: CKF) and Alphabet Inc (Google).

The LIC aims to provide investors with a growing quarterly dividend, which it has done so for the past five years.

It’s currently trading with a trailing grossed-up dividend yield of 8.12%.

Foolish takeaway

I think all three are attractive dividend shares and clearly offer decent potential income. At the current prices I would probably go for Clime as it offers the biggest yield and is less likely to be affected by rising interest rates compared to the other two.

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Motley Fool contributor Tristan Harrison owns shares of ARENA REIT STAPLED and Ramsay Health Care Limited. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended G8 Education Limited and Ramsay Health Care 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 Scott Phillips.

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