With the S&P/ASX 200 (INDEXASX: XJO) down 6% in the past month, many of Australia's biggest and best blue-chip stocks have been hit hard.
But the good news is our favourite dividend stocks, such as the big banks, supermarkets and miners, are now offering substantially better yields.
| Company | Grossed up trailing divided yield |
| Commonwealth Bank of Australia (ASX: CBA) | 7.5% |
| Westpac Banking Corp (ASX: WBC) | 7.8% |
| Australia and New Zealand Banking Group (ASX: ANZ) | 7.8% |
| National Australia Bank Ltd (ASX: NAB) | 8.5% |
| Telstra Corporation Ltd (ASX: TLS) | 7.8% |
Dividend-paying companies can provide an excellent source of passive income and the opportunity for capital gains.
What's more, the payments from most big Australian companies come with 100% franking, meaning the dividend is also tax effective. But it gets better…
If you hold the investment for more than 12 months, capital gains are treated at a reduced rate of tax, compared to if you hold your investment for less than a year.
Buy, hold or sell?
Despite all of the above companies offering excellent dividend yields, I am very hesitant to invest in them. I believe their shares are still not cheap and any investment at today's prices leaves only a small margin of safety. Meaning, if the share prices fall, it could quickly wipe out the perceived benefit of future bi-annual dividend payments.
