Dividends are one the biggest benefits of holding shares.
Especially at times when interest rates are low, the benefit of holding quality dividend-paying shares for the long term cannot be underestimated.
An added benefit of Australian dividend-paying shares is Franking Credits. Franking Credits are tax-effective, ultimately leaving shareholders with more in their pockets come tax time.
Finally and perhaps most importantly, dividend yields from many blue chip stocks are far higher than the 2% to 2.6% currently available from term deposits and savings accounts at a major bank.
With that in mind, here are three dividend stock ideas worthy of further consideration.
Your 3-stock dividend portfolio
- Woolworths Limited (ASX: WOW) – dividend yield: 5.23% fully franked
Grossed up for franking credits, Woolworths' shares are yielding a dividend equivalent to 7.5%. Australia's largest supermarket operator is currently dealing with growing competition from the likes of Coles and Aldi, but a 7.3% share price rally in the past month may give renewed confidence to investors moving forward.
- Collection House Limited (ASX: CLH) – dividend yield: 4.16% fully franked
Collection House is one of Australia's leading receivables management businesses, with offices dotted across the country. While Collection House's profits may be susceptible to the ebb and flow of credit and employment markets from year to year, it is a high-quality business making strong profits in a growing market.
- Telstra Corporation Ltd (ASX: TLS) – dividend yield: 5.5% fully franked
Telstra's grossed-up 7.8% dividend yield is arguably one of the most reliable on the ASX. However, its share price is not immune from market falls, and investors always should be mindful to pay a compelling price for its shares. Nonetheless, Australia's largest telecommunications company has significant appeal over the long term.
Buy, Hold or Sell?
At today's prices, each of these companies should be on your watchlist – at least. I'm waiting for a slightly lower price for Telstra shares before hitting the buy button, but Collection House shares are a solid buy in my book. Finally, I think Woolworths is a hold until it appoints a new CEO.
