Top 10 ASX Dividend Stocks Worth Your Attention

The Australian Securities Exchange (ASX) boasts numerous blue-chip stocks that might pique your interest. As of February 2023, the market is expected to deliver an average dividend yield of 4% - quite an attractive proposition, wouldn’t you agree?

But what’s all the fuss about high-dividend-yield stocks?

In this article, we’ll delve into the subject and provide some guidance on selecting the most promising dividend-yield shares.

The Advantages of High-Dividend Stocks

Investing in high-dividend stocks can be a prudent strategy for those seeking a consistent income stream, particularly in a low-interest-rate environment. Here are some compelling reasons to consider high-dividend-yield stocks:

Financial Robustness Indicated by Dividends

High dividend yield stocks can potentially offer benefits from a company’s robust financial standing. Why? Companies that consistently pay dividends are typically well-established, profitable, and generate steady earnings - all indicators of financial stability and strength.

In fact, dividend-paying stocks in the S&P 500 index outperformed their non-dividend-paying counterparts from 1927 to 2014. The former achieved an impressive average annual return of 10.4%, compared to just 8.5% for the latter over the same timeframe.

Moreover, dividend-paying stocks exhibited lower volatility, with a standard deviation of only 18%. This clearly demonstrates that investing in dividend-paying stocks can provide both higher returns and lower risk.

Dividend Reinvestment Programs (DRPs)

One advantage of high dividend yield stocks is the opportunity to participate in a DRP. By choosing to reinvest dividends into additional shares of the same stock instead of receiving cash payouts, investors may potentially generate higher returns over time.

Here’s the best part: most DRPs are free of transaction fees, which can help reduce costs and enhance investment returns.

A Defensive Investment Approach

High dividend yield stocks tend to be less volatile than growth stocks during market downturns. This is because they usually represent well-known, financially stable companies with a history of consistent earnings and dividends. In contrast, growth stocks’ high valuations are often based on optimistic future earnings projections, making them more susceptible to broader market fluctuations.

By offering a greater sense of security during market downturns, high dividend yield stocks can help mitigate losses and shield against market volatility.

Reliable Income Stream

As the renowned investor Warren Buffet once said, “If you don’t find a way to make money while you sleep, you will work until you die.”

High-dividend stocks can provide a dependable source of income, especially for those seeking passive revenue streams.

ASX Ranking of Dividend Stocks

The Australian Securities Exchange is one of the world’s premier financial markets, offering investors the chance to invest in a wide array of assets. Among the most popular investment options on the ASX are dividend stocks - shares that distribute a portion of their earnings to shareholders in the form of dividends.

The ASX ranking of dividend stocks is a compilation of the top dividend-paying stocks in the Australian market. This ranking is based on various factors, including the company’s dividend yield, dividend growth rate, and payout ratio.

Investors often utilize the ASX ranking to identify stocks with a consistent history of dividend payments and a high likelihood of maintaining this trend in the future.

10 High-Yield Blue Chip Shares on ASX Offering Over 10% Yield

Note: The data in this article reflects the market conditions as of April 27, 2023, and is subject to change.

Terracom Ltd (ASX: TER)

Terracom stands out as one of the highest-yielding stocks on the ASX, boasting a dividend yield of 27.40% and a gross yield of 33.27%. While the company doesn’t offer a dividend reinvestment plan (DRP), income-focused investors may find the high yield appealing. Terracom has also demonstrated strong performance with a 1-year return of 128.13%.

Although high-yielding stocks like Terracom may carry additional risk, investors seeking both income and growth potential might consider including it in their portfolio.

Yancoal Australia Ltd (ASX: YAL)

Yancoal Australia, a coal mining enterprise, offers a dividend yield of 21.08%, surpassing the ASX average. The company’s gross dividend yield matches its dividend yield at 21.08%, and it doesn’t provide a dividend reinvestment plan (DRP). Yancoal has demonstrated impressive market performance with a one-year return of 79.69%.

This high-yielding stock could present an opportunity for investors looking to capitalize on the company’s positive returns and attractive dividend yield.

Coronado Global Resources Inc (ASX: CRN)

Coronado Global Resources Inc, a coal mining company operating in the United States and Australia, offers an enticing dividend yield of 20.95%. The company doesn’t have a DRP in place, allowing investors to receive full dividend payouts. Both the dividend yield and gross dividend yield stand at 20.95%, indicating no tax withholding by the company.

With a robust one-year return of +28.20%, Coronado Global Resources Inc could be an attractive option for investors seeking high dividend yields and growth potential.

New Hope Corporation Ltd (ASX: NHC)

New Hope Corporation Ltd is a diversified business with interests spanning coal mining, exploration, port operations, oil, agriculture, innovative technologies, and investment. It offers a trailing dividend yield of 16.54%, exceeding the ASX average. The company’s gross dividend yield of 23.63% suggests no recent special dividend payments.

While New Hope Corporation doesn’t offer a DRP, income-focused investors may find the high yield attractive. The company has delivered an impressive 1-year return of 105.53%, demonstrating its ability to generate substantial returns for investors.

Tabcorp Holdings Ltd (ASX: TAH)

Tabcorp Holdings Ltd, a leading Australian gambling entertainment company, offers a dividend yield of 13.07%, surpassing the market average. The company provides a gross yield of 18.66% and has implemented a dividend reinvestment plan (DRP), allowing shareholders to reinvest dividends in additional shares. TAH has shown stability with a 1-year return of +3.13%.

Given its established position in the Australian gambling industry, Tabcorp could be an appealing investment opportunity for those seeking a solid dividend yield, particularly investors interested in the entertainment sector.

Regal Investment Fund (ASX: RFI)

Regal Investment Fund, a listed investment company focusing on Australian and global shares, offers a dividend yield of 15.86%. The gross yield matches the dividend yield, indicating no tax withholding. Regal Investment Fund has implemented a dividend reinvestment plan (DRP), giving investors the option to reinvest dividends in additional shares.

The fund’s focus on global shares, combined with its high dividend yield and DRP option, could appeal to investors seeking a diversified portfolio with a steady income stream.

Grange Resources Ltd (ASX: GRR)

Grange Resources Ltd, an Australian-based mining company specializing in high-quality iron ore production, offers a respectable dividend yield of 11.65%. The company’s gross dividend yield stands at 16.64%, suggesting no tax withholding on dividend payments.

While Grange Resources doesn’t currently offer a dividend reinvestment plan (DRP), the company has demonstrated a solid track record of consistent dividend payments to its shareholders.

Smartgroup Corporation Ltd (ASX: SIQ)

Smartgroup Corporation Ltd, a leading provider of employee management services, offers investors an attractive dividend yield of 11.60%. The company doesn’t have a DRP in place, and its gross yield of 16.57% indicates no tax withholding.

Smartgroup has consistently paid dividends, with a trailing dividend payout of 66 cents per share over the past 12 months.

Zimplats Holdings Ltd (ASX: ZIM)

Zimplats Holdings Ltd, a platinum mining company operating in Zimbabwe, currently offers a dividend yield of 11.07%. The company doesn’t have a dividend reinvestment plan (DRP) in place.

Both the dividend yield and gross dividend yield stand at 11.07%, indicating no tax withholding. Zimplats Holdings Ltd has shown positive performance with a 1-year return of +18.21%.

As a platinum producer, Zimplats Holdings Ltd is well-positioned to benefit from increasing demand for this precious metal. Investors seeking exposure to the commodities market and looking for income may want to consider Zimplats Holdings Ltd for their portfolio.

BSP Financial Group Ltd (ASX: BFL)

BSP Financial Group Ltd, based in Papua New Guinea, offers an attractive dividend yield of 11.01%. The company doesn’t currently provide a dividend reinvestment plan (DRP). With a one-year return of +7.61%, BSP Financial Group has demonstrated stable performance over the past year, even during periods of market volatility.

As one of the largest and oldest financial institutions in Papua New Guinea, BSP Financial Group presents a unique investment opportunity for those interested in the Pacific region. Given its solid dividend yield and positive return, investors may want to consider including BSP Financial Group in their investment portfolio.

Strategies for Selecting the Best Dividend Yield Shares

When choosing the most promising dividend yield shares, several factors should be taken into account:

• Dividend yield: Calculated by dividing the annual dividend by the share price, a higher dividend yield indicates a higher return on investment.

• Dividend payout ratio: This ratio represents the proportion of earnings paid out as dividends. A lower payout ratio suggests that the company is retaining more earnings for growth and has the potential to increase dividends in the future.

• Dividend growth rate: This metric measures the rate at which the dividend payout is increasing over time. Companies with consistent and growing dividend payments are generally more attractive to investors.

• Company fundamentals: It’s crucial to analyze the company’s financial health, including revenue growth, profitability, and debt levels, to ensure its capacity to maintain dividend payments in the future.

• Industry trends: Consider broader industry trends, including potential regulatory changes or technological disruptions that could impact the company’s ability to pay dividends.

Final Thoughts

The Australian Securities Exchange (ASX) offers a diverse range of companies with high dividend yields. While the high-yield stocks mentioned in this article may carry additional risk, they could also present attractive options for investors seeking both income and growth potential.

Before investing in any stock, even those with high dividend yields, it’s crucial to conduct thorough research and analysis.

Remember, while a high yield is important, it’s not the sole factor to consider. Investors should also evaluate a company’s financial performance, management quality, industry trends, and growth potential before making investment decisions. Conducting comprehensive due diligence can significantly enhance your long-term investment success.