A 'blue chip' business is commonly seen as the safest type of stock to buy because it's among the largest and most stable on the stock market.
Australia's blue chips are some of the country's most recognised names such as Commonwealth Bank of Australia (ASX: CBA), Woolworths Limited (ASX: WOW) and Sydney Airport Holdings Ltd (ASX: SYD).
Here are three blue chips that offer huge potential dividends:
National Australia Bank Ltd (ASX: NAB)
NAB is one of Australia's largest banks and has been a big beneficiary of Australia's economic success over the past two decades.
It's building up a reputation of being the most forward-thinking business bank with its agreements with Xero FPO NZX (ASX: XRO) and REA Group Limited (ASX: REA).
NAB is now focused on its domestic arrangements which could prove to be a sound move. It's currently trading at 12x FY17's estimated earnings with a trailing grossed-up dividend yield of 9.58%.
Telstra Corporation Ltd (ASX: TLS)
Telstra is the telecommunications giant of Australia. I have pointed out previously that Telstra has several internal and external problems that may affect future profitability. The NBN and TPG Telecom Ltd's (ASX: TPG) new mobile network are just two issues for Telstra that need attention.
However, it must be said that Telstra has remained committed to its dividend payments. It has grown or maintained its dividend every year since 2007. It currently has a dividend payout ratio of above 100%, which isn't a healthy business habit, but it has done this before.
Telstra is currently trading at 13x FY17's estimated earnings with a grossed-up dividend yield of 10.3%.
Insurance Australia Group (ASX: IAG)
This is the insurance group behind brands like NRMA, CGU, SGIO and SGIC. The insurance industry doesn't provide shareholders with the strongest economic moat, but it does give investors in Insurance Australia Group a big dividend.
Having a diversified group of brands allows the business to advertise to all segments of the insurance market.
It's currently trading at 19x FY17's estimated earnings with a trailing grossed-up dividend yield of 5.5%.
Foolish takeaway
All three of these blue chips could be good income-earners for your portfolio, but don't expect a lot of capital growth. Out of the three I think my preferred choice would probably be Telstra, however I would not be a buyer of any of them at the moment. I'd want the share prices to be at least 10% lower.
