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3 bumper dividend yields to beat low interest rates

With the Bank of England recently cutting interest rates to just 0.25%, there’s no doubt it’s a tough time for savers. One option for those looking to boost their income is dividend stocks, with many blue chip companies in the FTSE 100 paying dividends that are well in excess of cash savings accounts rates.

Let’s look at three well known stocks that are rewarding their shareholders with bumper dividend payouts.

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Legendary track record

Royal Dutch Shell (LSE: RDSB) needs no introduction, being one of the largest companies in the world. The oil major is known for its legendary dividend status, having not cut its dividend since World War 2.

A key feature of Shell is that it reports its earnings and declares its dividends in US dollars and therefore when the pound is weak, UK investors receive an extra boost to their dividend income. This is certainly the case at the moment, with Shell’s dividend yield now standing at a huge 7.2%, on the back of a Brexit-induced sterling collapse.

Of course, there’s no guarantee Shell will continue to pay out such a high dividend, especially as the company is struggling to generate profits with the oil price so low. Indeed, the fact that the dividend yield is so high, suggests that many doubt Shell’s ability to pay the dividend. Having said that, Shell knows the importance of the dividend to its investors and is sticking with its previous dividend commitments for the time being.

Improving profitability 

Insurance company Aviva (LSE: AV) is another FTSE 100 giant with a formidable dividend yield. It paid out dividends of 21p per share for FY2015, which equates to a 5% dividend yield at the current share price. And with city analysts forecasting Aviva to boost its payout to 23p for FY2016, it looks like dividend growth is on the cards.

The insurer reported a solid set of interim results last week, announcing that operating profit was up 13% year-on-year and that it would be boosting its interim dividend by 10%. Reassuringly, chief executive Mark Wilson stated that Aviva is well insulated from external events and that the company should be resilient to a low interest rate environment.

Aviva has had its problems in the past, but with the integration of Friends Life going smoothly, profitability is improving and shareholders should be rewarded going forward.

Defence theme

With governments around the world prioritising national security, I believe defence is a compelling investment theme right now. And if you’re looking for a defence giant that pays a sizeable dividend, look no further than BAE Systems (LSE: BA). It has an excellent track record of dividend consistency and last year paid out 21p per share, equating to a yield of 4% at the current share price.

CEO Ian King recently said he didn’t anticipate the result of the European Union referendum having any near-term trading impact on the business and with the City predicting revenue growth of 8% for FY2016, BAE Systems looks like an excellent dividend stock in my opinion.

A 4% dividend yield you don’t know about

The three stocks above are well known for their sizeable dividend yields and are very popular amongst investors. However, if you’re looking for an under the radar dividend stock, I'd urge you to read this free report from The Motley Fool: A Top Income Stock.

This UK company currently yields over 4% yet miraculously trades on a low P/E of under 8. To reveal the name of this stock click here.

Edward Sheldon owns shares in Royal Dutch Shell B, Aviva and BAE Systems. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.