Given official interest rates are just 2.00%, it may perhaps be surprising to know that many Australian stocks currently yield well over 5% fully franked.
In fact, after adjusting for their tax-effective franking credits, many prominent ASX stocks are yielding more than 7%.
Here are four such dividend stocks you could consider adding to your watchlist today.
- Westpac Banking Corp (ASX: WBC) – Trailing gross dividend yield: 7.5%
Despite concerns over the local housing market, increased regulation and a lofty valuation, Westpac shares continue to yield well over 7%, after adjusting for franking. Analysts polled by Morningstar are forecasting a $1.87 dividend to be paid over the next 12 months.
- WAM Capital Limited (ASX: WAM) – Trailing gross dividend yield: 9.35%
WAM Capital is the largest fund run by prominent investor, Geoff Wilson. The $890 million listed investment company (LIC) has a rich history of dividend payments. In June, some of WAM Capital's largest holdings included Hunter Hall Global Value Limited (ASX: HHV) and Burson Group Limited (ASX: BAP).
- Rio Tinto Limited (ASX: RIO) – Trailing gross dividend yield: 7.18%
In the face of plunging commodity prices, Morningstar's analyst consensus forecasts currently imply a forecast grossed-up dividend yield of 7.9%. As we noted here, however, major resources companies like Rio may not be the 'sure thing' they once were. As a result, investors should avoid buying shares, for now.
- G8 Education Ltd (ASX: GEM) – Trailing gross dividend yield: 7.75%
Childcare centre owner and operator, G8 Education, has been flashing across newswires today after it upped its takeover bid for competitor, Affinity Education Group Ltd (ASX: AFJ). G8 has grown strongly by acquisition in recent years, yet continues to pay a very large quarterly dividend. Analysts forecast it to pay a gross yield equivalent to 9.3% in the next year.
Should you buy these four stocks?
Of these four stocks, the only one I consider to be a worthy long-term investment today is WAM Capital, although I'm keeping a close watch on G8 Education and its takeover attempt of Affinity. However, while I like WAM Capital at today's prices, there's another ASX dividend stock which I think is an even better investment.
