Top 10 ASX dividend stocks to watch in May 2024

ASX dividend stocks: What you need to know

When buying shares, investors typically benefit in two ways: from capital gains due to an increase in share price, and from profits paid out in the form of dividends.

Dividend stock investors view a stock’s dividend yield as a key measure of a stock’s value. It offers an insight into how great the return on an investment will be. To calculate the dividend yield, investors simply divide the annual dividend paid by the share price.

To begin initial research, IG offers market screeners to filter out ASX stocks with the highest dividend yields.

Investors should then inspect an individual company’s financial status to determine the future viability of its dividend yield. At a minimum, this should include its historical profit generation, debt levels, and prior dividend history.

Amongst the screening criteria we use are:

Dividend yield
Cashflow
Dividend growth over the last five years
Market price correlation (beta) based on monthly price movements over the past five years
Outlook for the next 12 months based on a slowing economy and interest rates peaking

How to trade or invest in ASX dividend stocks

1. Learn more about ASX dividend stocks
2. Find out how to trade or invest in ASX dividend stocks
3. Open an account
4. Place your trade

You can open a position on ASX dividend stocks either through share trading or derivatives trading. Share trading means that you take direct ownership of the stock. By comparison, derivatives trading – such as CFD trading – allows you to speculate on the price movement of a company’s shares without actually taking ownership of them.

For a complete breakdown of the benefits and drawbacks of each strategy, please click here.

ASX dividend stocks: further important information to consider

Many investors add ASX dividend stocks to their portfolios for the long term. While this is a sound investment strategy, it also means that any errors are correspondingly magnified.

One key thing to note is that the below ‘top 10’ dividend stocks are not the highest yielding. These are stocks that appear to have a decent chance of continuing to pay out dividends, although there’s no guarantee of future success. Investors can often have higher success with lower-yielding shares of growing businesses rather than get caught in a yield trap.

Avoiding yield traps

A ‘yield trap’ is a stock with a high yield underpinned by poor financials. If a company issues a higher-than-normal dividend or its share price falls quickly, it can appear to be high-yielding. However, the yield is calculated using past figures that do not account for very recent performance.

Many investors are caught out by the siren’s song of ultra-high-yield percentages without considering the whole picture.

Often yielding stocks either have low growth potential because management pays out all the profit in dividends, or else they are cyclical stocks such as mining companies that can generate enormous amounts of cash and pay dividends for four years, and then generate almost zero cash on the down cycle.

Accordingly, higher-yielding dividend stocks usually require more active management, while lower-yielding ones come closer to truly passive income. Similarly, compounding by reinvesting dividends can exponentially increase returns.

Diversifying to spread risk

It’s also worth noting that many ASX dividend stocks are blue chips with very low chances of the outsized capital gains that ASX growth stocks can deliver. It can make sense to have a mixed portfolio that offers potentially bigger returns in exchange for a little safety.

Finally, it’s important to consider the concentration or diversification of a company’s interests and revenue. Companies with the most resilient dividends are often the ones with diversified interests in their sector.

And investors should take care to spread their money across multiple sectors, to further reduce risk. Piling all of one’s capital into mining stocks might give a stellar return right now, but usually at the cost of a good night's sleep.

Remember, past performance is not an indicator of future returns.

Top 10 ASX dividend stocks to watch

1. New Hope
2. WAM Capital
3. Helia Group
4. Air New Zealand
5. Yancoal
6. Myer Holdings
7. Platinum Asset Management
8. Abacus Group
9. Magellan Financial Group
10. Cromwell Property Group

New Hope Corporation

New Hope is as ASX energy firm with a focus on coal exploration and development. Like rival Yancoal, the company operates in Queensland and New South Wales, but is also diversified into gas, oil, agriculture, in addition to port operations.

The company makes an effort to highlight its eco-friendly extraction methods, and also wider community involvement — but is still likely to be unattractive to ESG-focused investors. Nevertheless, it recently reported record underlying EBITDA on sizeable demand.

Dividend Yield: 19.16%

WAM Capital

WAM Capital — or Wilson Asset Management — provides investors with exposure to an actively managed diversified portfolio of undervalued growth companies listed on the ASX. For context, it retains the likes of Life360 and Tuas in its portfolio.

The company recently, increased its stake in Cettire, despite questions over whether the company’s custom duties payments concerns.

However, WAM has fallen by 27% in five years, with recent financial results raising questions over the dividend’s sustainability.

Dividend Yield: 15.71%

Helia Group

Helia Group is Australia’s largest provider of home lenders mortgage insurance (LMI). It also provides tailored risk and capital management solutions for lender customers in the Australian residential mortgage market, that complement the traditional LMI product offering.

2023 results saw Helia deliver a statutory net profit after tax of $275.1 million, up from $201.2 million in FY22. Accordingly, it declared a fully franked final ordinary dividend of 15 cents per share
and an unfranked special dividend of 30 cents per share.

Dividend Yield: 15.40%

Air New Zealand

Air New Zealand flies people and cargo between twenty New Zealand regions. In recently announced 2024 interim results, the airline saw earnings before tax of $185 million, while passenger revenue was $3.1 billion, driven by ‘a significant ramp-up in capacity across the international network.’

The company is currently undergoing a strategic pricing review in accordance with ongoing inflation pressures and expects a tougher forward trading environment. However, it did pay out an ordinary interim dividend of $0.02 per share, reflecting an arguably resilient business model.

Dividend Yield: 14.31%

Yancoal

Yancoal Australia has exercised huge growth over the past few years. The ASX company is an important coal producer with a portfolio of thermal and metallurgical coal mines in Queensland and New South Wales — with most of its coal shipped to China.

As a caveat, Chinese economic demand seems to be wavering despite governmental support, and Yancoal is dependent on demand from the Communist country. Further, while the dividend is high, it failed to make a payout in 2021 — and this may happen again.

Dividend Yield: 12.55%

Myer Holdings

Myer Holdings is a well-known Australian mid-range to upscale department store chain. It trades in all Australian states and may benefit in 2024 from falling interest rates and inflation, in addition to the well-published personal income tax cuts.

In half-year results, comparable sales grew by 0.1% despite macro conditions and following record sales in H1 2023. For context, total sales fell by 3% year-over-year to $1.8 billion, but this was 13.8% higher than pre-pandemic H1 2020.

Of course, the retailer has the same risks as the wider sector, including the risk of potential recession given slowing economic growth.

Dividend Yield: 12.24%

Platinum Asset Management

Platinum Asset Management is a popular Australian asset management company that focuses on international shares, providing portfolios of listed companies from around the world. Platinum offers only one core investment style – seeking out companies that are yet to be fairly valued by the market.

However, poor financial results saw the stock fall significantly in 2023 — meaning the dividend may
not be sustainable.

Dividend Yield: 12.04%

Abacus Group

Abacus Group is an Australian real estate investment trust (A-REIT) with an investment portfolio concentrated in the office and commercial property sectors.

While the dividend is impressive, it’s important to note that the company split into two separate entities in mid-2023, with newly created Abacus Storage King taking over the storage assets. This means Abacus now has little standalone trading history, and less diversification in the event a segment of the real estate sector runs into trouble.

Dividend Yield: 11.97%

Magellan Financial Group

Magellan Financial Group is an Australian investment manager focusing on global equities and global listed infrastructure. Half-year results to 31 December 2023 saw the ASX dividend stock’s statutory net profit after tax rise by 24% year-over-year to $104.1 million, and it declared a 29.4 cent interim dividend, franked at 50%.

Importantly, the company has recently resolved legacy issues, including Employee Share Purchase Plans alongside the uncertainty around the Magellan Global Fund. Further, it has appointed respected Sophia Rahmani as Managing Director of the company’s key subsidiary.

Dividend Yield: 11.35%

Cromwell Property Group

Cromwell Property Group boasts more than 210 properties in its portfolio comprising 3.5 million square metres of lettable area let out to more than 2,100 tenants.

In half-year results, the company made a statutory loss of $271.4 million, impacted mostly by a $240.2 million decline in property valuations — with an operating profit of $83.7 million. Total assets under management remain broadly stable at $11.4 billion, while Cromwell’s investment portfolio occupancy rate stands at 93.4% with a WALE of 5.3 years.

Dividend Yield: 10.96%

Past performance is not an indicator of future returns.

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