It might surprise you to learn that over the long term dividends make up a large part of a share portfolio's returns. In a study by Elroy Dimson, Paul Marsh and Mike Staunton (see Keeping faith with stocks) it was found that "The longer the investment horizon, the more important is dividend income."
And for retirees, dividends are the life blood of their investment portfolio. While growth in the value of the portfolio is important in order to keep pace with inflation, it is the steady stream of dividends which pays the bills.
Even though I'm not a retiree, I still like dividends because along with my regular savings, they provide me with the cash to make further investments without the need to sell existing ones.
So with all of that in mind, I thought it might be interesting to look at the dividend yields of the stocks that make up the ASX100. The table below lists the top 10 dividend paying stocks.
| ASX Code | Company Name | Current Price | Dividend Yield | Franking | Payout Ratio |
|---|---|---|---|---|---|
| DUE | DUET Group | $1.69 | 11.9% | 0% | 171% |
| SKIDA | Spark Infrastructure Group | $1.14 | 11.4% | 0% | 169% |
| TEL | Telecom Corporation of New Zealand Limited | $1.71 | 10.6% | 0% | 120% |
| TLS | Telstra Corporation Limited | $2.84 | 9.9% | 100% | 90% |
| MAP | MAp Group | $2.96 | 9.2% | 0% | -164% |
| GFF | Goodman Fielder Limited | $1.32 | 8.4% | 20% | 92% |
| WDC | Westfield Group | $9.60 | 8.2% | 0% | 116% |
| APA | APA Group | $4.15 | 8.1% | 0% | 169% |
| WAN | West Australian Newspapers Holdings Limited | $6.40 | 7.3% | 100% | 100% |
| CFX | CFS Retail Property Trust | $1.76 | 7.2% | 0% | 120% |
Top Dividend Paying Stocks In The ASX100
The dividend yields on offer here range from 7.2% right up to 11.9%. However, as you might have noticed, a number of the stocks have payout ratios above 100%. This is probably not sustainable as it means these companies are paying out more in dividends than they are earning in profits.
Lets knock out those companies with a payout ratio of over 100% and see what we can find.
| ASX Code | Company Name | Current Price | Dividend Yield | Franking | Payout Ratio |
|---|---|---|---|---|---|
| TLS | Telstra Corporation Limited | $2.84 | 9.9% | 100% | 90% |
| GFF | Goodman Fielder Limited | $1.32 | 8.4% | 20% | 92% |
| QBE | QBE Insurance Group Limited | $18.14 | 7.1% | 20% | 66% |
| IOF | ING Office Fund | $0.57 | 6.9% | 0% | 70% |
| TAH | Tabcorp Holdings Limited | $7.13 | 6.8% | 100% | 71% |
| MYR | Myer Holdings Limited | $3.47 | 6.7% | 100% | 75% |
| CPA | Commonwealth Property Office Fund | $0.83 | 6.7% | 0% | 75% |
| NAB | National Australia Bank Limited | $23.89 | 6.6% | 100% | 73% |
| DJS | David Jones Limited | $4.75 | 6.5% | 100% | 91% |
| WBC | Westpac Banking Corporation | $22.06 | 6.5% | 100% | 72% |
Highest Yielding Stocks With Payout Ratio Below 100%
The list has changed somewhat but with dividend yields ranging from 6.5% through to 9.9%, the income potential is still quite respectable.
Other Things To Check
The exercise we have just been through is a simple one. We would obviously need to do more research before committing any of our hard-earned cash to buying any of these shares. While not an exhaustive list, what follows are a couple of the items on my investment checklist - things I would check before investing..
One important factor I like to consider with any sharemarket investment in the level of debt and the company's ability to service that debt. So I'd be checking each of the company's debt to equity ratios and their interest coverage ratios (a measure of how able a company is to make its interest payments).
Dividend growth is another thing to consider. I like to see the dividend amount rising each year. It not only provides me with a growing income but also demonstrates that the business is growing and has strong cash flow.
What Have We Learnt?
I find this sort of comparative analysis to be very useful. It might be finding the best dividend paying stocks or the shares with the lowest price to earnings ratios or those with the highest return on equity - it doesn't really matter. What matters is looking at the stock market from all of these different angles and seeing how various investment opportunities stack up against one another.
I should point out that none of the shares mentioned in this post should be considered recommendations. Make sure you do your own research.
1 comment:
I realized that the best dividend paying stocks are in the technology sector especially telecommunications companies. No doubt they are touching our lives with our need of communication devices and gadgets to get in touchwith our love ones.
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