Dividend investing is a great way to ensure that you create passive wealth during both bull and bear markets. The ASX 200 index has regained some of the lost ground from last week, however, the narrative is changing, and the paradigm is shifting. Growth stocks are being dumped for value stocks as the economy is coming back to life. With low interest rates continuing to persist and value stocks becoming more attractive, consider these 3 best dividend shares on the ASX that hit the sweet spot.
The Aussie supermarket giant operates liquor and express divisions along with supermarkets. After a rather torrid time for COL shares, they have started to rebound, returning close to 7% in the past month. The rebound has been largely due to normalising consumer behaviour and Coles cycling the significant impacts of Covid19. In the third quarter update, Supermarkets sales decreased by 6.1%. Liquor and Express sales increased by 2.6% and 7.4% respectively.
Early signs of normalising consumer behaviour were observed including improved transaction growth, a recovery of COVID-19 impacted categories such as impulse, convenience and food-to-go, and Sunday returning to be the busiest trading day of the week.
COL shares currently trade at $16.7 a share and with a dividend yield of 3.61%, it makes for a good blue-chip, high dividend stock in an inflationary environment wherein the consumer staples company will be able to pass on the impacts of inflated prices to the end customers.
The Aussie banks have been back in favour for a while now. The low-interest rate environment and reduced regulations around lending has resulted in Westpac being able to increase its lending business. It has been a promising start to FY2021 with increased cash earnings, growth in mortgages and continued balance sheet strength. First half earnings were considerably higher than the prior corresponding period, mainly due to an impairment benefit reflecting improved asset quality and a better economic outlook. New lending for housing has surged, up 49 per cent over the past year, including a 75 per cent jump from the May 2020 low.
Westpac announced an interim dividend of 58 cents a share in light of the positive performance where statutory net profit increased by 189% to $3.4 billion, compared to the previous corresponding period.
WBC shares currently trade at $26.27, close to all-time highs. With a dividend yield of 3.4% and the Australian economy looking extremely positive, WBC is surely one of the best dividend shares to consider.
BHP Group Ltd (ASX: BHP) is arguably the most well diversified mining and exploration company there is, and it is a part of every investor’s portfolio for different reasons – maybe for the stable dividends, or to decrease the overall volatility of the portfolio. BHP derives revenues from 4 main commodities – Iron Ore, Copper, Coal, and Petroleum. These commodities are very sensitive to the global economic outlook and activity. With economic activity increasing across the developed world, increased demand and inflation fears have resulted in high commodity prices.
BHP shares thus posted a high of over $51 a share earlier this month. However, with iron ore prices coming under pressure, the stock price has pulled back and is currently trading at $46.35 a share and with a dividend yield of 4.35%.
BHP’s profits and high dividend shares will most likely soar once again for full year FY21, just as it did in the half year earnings, to result in a very healthy dividend payout once again!
Income stocks are potentially one of the hardest to pick as there are a lot of factors that need to be considered – from industry tailwinds to financial health of the individual stocks, and a lot of little things in between them. Several ASX listed stocks have also cut dividends in light of the challenges posed by the pandemic. The low interest rate environment brings income stocks to the forefront for most investors. Shares in Value research team have picked their top 3 ASX income stocks to buy and it can be downloaded for free!