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Highlights
- Investors lap up dividend shares to boost their income.
- Rising consumer prices and interest rates are known to discount future values of a firm’s profits.
- Dividend shares are known to offset inflationary pressures.
With inflation already on the higher side and interest rates all set to be increased, investors would be looking at dividend shares to boost their income. Rising consumer prices and interest rates are known to discount future values of a firm’s profits.
In such a scenario, dividend shares are expected to provide investors with impressive yields, which could counter the inflationary pressures that the Australian economy is currently facing.
(However, high dividend-paying shares are not good always. A stock’s dividend yield might be on the higher side due to a significant fall in its stock price, implying financial trouble that could impact its ability to deliver future dividends)
BHP Ltd (ASX:BHP)
Mining stocks offer protection from inflation since the price of commodities generally surges when prices are accelerating. BHP Group is a well-known global resources company with key operations as an iron ore miner and oil player.
BHP Group declared a record dividend in the first half of the financial year 2022 and announced an interim dividend of US$1.50 per share, up from US$1.01 a share declared a year ago.
BHP has a dividend yield of 9.88% (by 1:10 PM (AEST) on 22 April 2022).
Fortescue Metals Group (ASX:FMG)
Fortescue Metals Group is a well-known global iron ore miner and is engaged in the exploration, development, production, processing and sale of iron ore.
The company generates higher earnings and dividends when prices of iron ore rise.
In the first half of FY22, the ASX dividend share paid an interim dividend of 86 cents per share. It represents a 70% payout of the first-half net profit after tax (NPAT).
FMG has a dividend yield of 13.97%.
Commonwealth Bank of Australia (ASX:CBA)
The Commonwealth Bank of Australia, or CommBank, is an Australian multinational bank with businesses across New Zealand, Asia, the US, and the UK.
Commonwealth Bank of Australia raised its dividend by 17% to AU$1.75 a share. The company’s last-year interim payout was AU$1.50 per share.
In FY21, Commbank paid an annual dividend of AU$3.50 per share. That was an increase of 17% compared to FY20. In February 2022, the bank announced an interim dividend of AU$1.75 per share, representing a 17% increase on the FY21 half-year dividend.
CBA has a dividend yield of 3.54%.
Rio Tinto Ltd (ASX:RIO)
Rio Tinto Group is an Anglo-Australian multinational company that is the world's second-largest metals and mining corporation.
Rio Tinto announced the highest-ever dividend to its shareholders in its half-yearly report for the financial year 2022 (1HFY22).
The global iron ore giant’s board declared a US$16.8-billion full-year dividend, equivalent to 1,040 US cents per share and 79% of underlying earnings. It includes a US$6.7 billion record final ordinary dividend (417 US cents per share) and US$1.0 billion final special dividends.
Rio has a dividend yield of 9.67%.
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