With interest rates at record lows everyone is on the hunt for yield. The RBA has their hands tied and won’t be raising rates any time soon. Investors have resorted to equities to find securities with bond type characteristics i.e. bond proxys. This has caused the share prices of high yielding stocks such as Transurban (TCL) to hit record highs as investors pile in and collect dividends. But buying these high dividend stocks is fraught with danger, especially when the US begins to increase interest rates. The most risky assets in the Aussie equity market are property and infrastructure and high yielding defensive stocks. These stocks known as bond proxies because of their high dividend yields. As the Quantitative Easing drug wears off, expect the property A-REIT stocks to reverse, longer dated bonds to sell off and an unwinding in risk assets. On the flip side, Bank stocks benefit when rates go up as their Net Interest Margin increases. It’s also positive for cyclical stocks. So if there’s one place investors should be – it’s the big banks. Now we realise that the banks have underperformed of late due to all the saga surrounding the Royal Banking Commission. That aside, NAB is on a PE of 13.31x and offering a grossed up dividend of 9.66%. That’s a huge dividend at a lowish PE. So here are 4 dividend paying…

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