Australian companies are known as having some of the most generous dividends across the world. This approach by Australian businesses may result in slower growth, but it does reward shareholders with the assured rewards of dividends.
Dividends are great because they are paid to shareholders like clockwork, whereas trying to know when to buy and sell shares makes it harder to know when to push the trade button and you also have to factor in brokerage costs.
So which stocks are the best ones to buy for dividends? It's generally thought that large blue chips are the biggest dividend payers and most reliable, so here are three dividend stocks that could make solid additions to your portfolio:
Crown Resorts Ltd (ASX: CWN)
Crown is the $8.5 billion owner and operator of some of the biggest casinos and hotels in Australia. It's recently had some trouble in China when some of its employees were arrested for allegedly advertising gambling to Chinese nationals, which is why the share price is currently 10% lower than before the unfortunate announcement.
However, the market seems to expect that all VIP gaming revenue will be affected. This would be a big hit to revenue if this occurred, but the issue is only with Chinese nationals.
Crown could have a great few years once some of its big upcoming projects are up and running such as its Sydney Barangaroo project that could really boost revenue. It also is expanding its Melbourne operations with another hotel which could be a very profitable venture if it achieves the same occupancy rates as its other three Melbourne hotels.
Crown is trading at 21x FY17's estimated earnings with a partially franked dividend yield of 6.23%.
Medibank Private Ltd (ASX: MPL)
Medibank is the largest private health insurer with a market capitalisation of $7.8 billion.
The healthcare industry is one of the most defensive on the ASX, making it reliable in good times and downturns. Medibank is in the difficult position of trying to make the rising costs of healthcare affordable for policyholders without raising premiums too much, whilst also trying to make growing profits for shareholders.
This led to Medibank actually losing a bit of its dominant market share in FY16, even though it has been heavily promoting its discount brand of AHM.
Management have done a good job so far of reducing its expense ratios which could be key to growing profits without raising premiums as fast as it has in recent times.
Medibank is trading at 18.5x FY17's estimated earnings with a grossed up dividend yield of 5.51%.
Foolish takeaway
Both of these stocks would be strong additions to a blue chip portfolio. I think both of these have good, long term futures so it's hard to pick one at the current prices. However, if these two dividend-paying shares aren't enough, perhaps these blue chips would really strengthen your portfolio.
