15 blue-chip income stocks to buy following this week's crash

This week Australian shares got close to two-and-a-half year lows due to an oversupply of oil, which saw crude oil prices fall below $US30 per barrel. Yesterday we witnessed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) drop more than 2.2 per cent to 4865, its lowest since July 2013.

Following the crash, I thought it would be a great time to find some blue chip income stocks paying good solid dividends to help ease the pain.

By income stocks, I mean stocks paying great fully franked dividends.

There are three main components to the list I've compiled below.

1. The dividend yield, which is the income component
2. The dividends must be fully franked, which will remove the taxation component
3. Dividend payout ratio, the percentage of earnings paid to shareholders in dividends. This is for information purposes only

What is a dividend yield?

The dividend yield tells investors how much they are earning on a common stock from the dividend alone based on the current market price.

The dividend yield ratio is one of the most commonly quoted financial ratios and shows how much a company pays out in dividends each year as a percentage of its share price. It's expressed as a percentage and is calculated by dividing the annual dividends paid out by the current share price.

There are two types of dividend yield based on time period. Put simply, a 'trailing yield' is calculated using the total dividends over the past year, and a 'forward yield' is some estimation of the future dividend yield of a stock.

Considering the yield offered by many large ASX-listed companies is higher than the current RBA Cash Rate of 2.0%, investing for dividends can be an attractive strategy for the conservative portion of an investor's portfolio.

I've used the trailing yield over the past 12 months. Although investors must note that a high trailing yield is often a sign that the market expects the dividend to be cut and there should not be relied upon.

What does fully franked mean?

Fully franked dividends mean you don't need to pay tax on the dividends you receive because it's already been paid for by the company.

Dividends are paid out of profits which have already been subject to Australian company tax which is currently 30%. This means that shareholders receive a rebate for the tax paid by the company on profits distributed as dividends.

What is the dividend payout ratio?

The dividend payout ratio is the percentage of earnings that the company pays to shareholders in dividends.

Now that you understand the dividend yield, dividend payout ratio, and fully franked. Here's the search criteria I used:

Sectors include: Consumer Discretionary, Consumer Staples, Energy, Financials, Healthcare, Industrials, Information Technology, Materials, Telecommunication Services, Utilities

Market Cap – Large Cap

Trailing Div Yield % – Greater than 4.8%