Dividend Stocks to Outperform in Coming Days?

  • Feb 12, 2020 AEDT
  • Team Kalkine
Dividend Stocks to Outperform in Coming Days?

The outbreak of Coronavirus appears to rekindle the investor’s uncertainty that had just begun to recede after the cooling of the bushfire. Amidst the erratic market scenario, the investments in the dividend stocks can be a potential avenue to avoid a high degree of risk associated with the growth stocks, especially when the benchmark index is trading close to its year highs. ASX Dividend Stocks have performed relatively well after the fever for growth stocks appears to be subsiding.

If you are one of those risk-averse investors who forgo any thoughts about the stock market, the probability is that the time armed with high inflation and the low-interest rate is eating up all your hard-earned wealth.

The Consumer Price Inflation in Australia is recorded to be 1.8% for December 2019. At the same time, RBA’s decision to hold the interest rate at 0.75% comes as a lethal combination for your bank’s deposits.

Confined with your innate nature of risk avoidance, yet willing to make profitable investments? The top dividend ASX stocks potentially answer your dilemma for investments. The dividend stocks not only provide passive income to the investors in the form of interest but also provide prospects for capital appreciation coupled with dividend growth. Therefore, why not leverage the best of both worlds, especially in times when banks seem to be failing our conservative financial expectations. Here are three top picks among the dividend stocks that are under the investors' radar.

As on 12 February 2020 prices (Source: ASX)

National Australia Bank

National Australia Bank (ASX: NAB), a blue-chip company that is often regarded as one of the appealing options for investors looking for the investment that would ensure a steady income alongside the capital gains. With the dividend yield of 6.41%, this banking sector stock finds its way in most of the dividend chasing portfolios.

National Australia Bank caters to the financial service requirement of both the individuals as well as the banks in Australia, New Zealand, US, UK, and many Asian countries. Other than the personal banking solutions, the businesses both small and large are one of the prominent customers of NAB. It offers business accounts, financing, loan, and varying financial services to the business entities.

National Australia Bank, with the market capitalization of $76.34 Billion, has been among the top performers when it comes to dividend distribution. The last payment for the dividend was made on 12 December 2019 with the half-yearly dividend accounting to be 83c per share. The dividend coverage ratio for the bank comes to be 1.01, which can pose questions to its ability to sustain such a high dividend yield in the future. It should also be noted that the bank has reduced the dividends by 16% from $1.98 in 2018 to $1.66 in 2019, thanks to lower profit. The dividend yield as on 12 February 2020 stood at 6.41%.

The blue-chip stock has performed consistently in the past year if you look through the lenses of dividend yield. The fully franked dividends offered by the bank can be assistance in vanquishing your thoughts about the tax burden and eliminate the double taxation on your income.

Wesfarmers

Those investors who focus on attaining regular dividends alongside evading the substantial risk of capital loss, Wesfarmers (ASX: WES) has been a favorite. Wesfarmers operative in the retail sector has witnessed considerable growth in both sales and share prices in the past year. The net profit for the company is up by 13.5% while the net revenue increased by 4.3% in 2019 compared to the previous year.

Headquartered at Perth, this Australian conglomerate with the market capitalization of $51.99 Billion covers diverse operations ranging from home improvement, general merchandise, office supplies to different industrial products.

Wesfarmers most recently offered a dividend of 78cps on 9 October 2019, currently, the annual dividend yield stands at 3.88%, as on 12 February 2020. The regularly climbing price of the shares is also supported by a consistent increase in the dividend, thus maintaining a healthy yield.

With the dividend imputation through fully franked dividends offered by the retail giant, the investors can bypass the hassles and trouble of the double taxation on their income.

Rio Tinto

Rio Tinto Limited (ASX: RIO), is one of the world’s largest player in the metals and mining sector. Headquartered in Melbourne with the market capitalization of $36.61 billion, the Company is prominently associated with the discovery and extraction of different minerals such as aluminum, iron ore, copper, gold, energy products, etc.

When the matter is about ensuring the reliable stream of payments, large caps with a solid balance sheet is the prominent answer for the investors. The earnings per share of the mining company are $11.435, while its dividend yield is 4.76%, as on 12 February 2020. The mining company offered the 100% franked dividend of 307.58c on 19 September 2019 making the trailing twelve months dividend to be $8.97.

The coverage ratio which is a numerical indicator of the company’s ability to pay its dividend for the shareholders comes out to be 1.274.


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There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

CLICK HERE FOR YOUR FREE REPORT!
   
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