Top 10 ASX dividend stocks to watch in September 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 with us either through share trading or CFD trading. Share trading means that you take direct ownership of the stock.¹ By comparison, derivatives trading – such as CFD trading – allows you to take a position 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

These shares have been selected because they are the highest-yielding dividend stocks with a dividend cover ratio of 1 or above in September 2024. While they may not necessarily represent the best long-term growth investments, they have garnered significant investor interest.

1. Helia Group Ltd
2. Magellan Financial Group Ltd
3. Rio Tinto Ltd
4. Waypoint REIT Ltd
5. NRW Holdings Ltd
6. QBE Insurance Group Ltd
7. AMP Ltd
8. BlueScope Steel Ltd
9. Ramelius Resources Ltd
10. Perseus Mining Ltd

Helia Group Ltd (Dividend Yield: 7.77%)

Helia Group, formerly Genworth Mortgage Insurance Australia Ltd, is a leading Lenders Mortgage Insurance (LMI) provider in Australia. LMI helps protect lenders if a borrower defaults on a high loan-to-value ratio residential mortgage. By taking on this risk, Helia enables lenders to provide more home loans to borrowers who may not have large deposits, facilitating wider home ownership.

Helia has succeeded due to its strong position in the Australian mortgage insurance market and its ability to manage risk effectively. The company’s consistent profitability and strategic partnerships, like the one with Great Southern Bank, highlight its ability to adapt and thrive in a competitive environment. Investors find Helia attractive due to its solid financial performance, including regular dividend payments, and its role in the stable and essential mortgage industry.

Helia Group has a dividend yield of 7.77% with a dividend cover ratio of 2.2.

Magellan Financial Group Ltd (Dividend Yield: 7.06%)

Magellan Financial Group is a specialist funds management company focusing on global equities and infrastructure. The company offers a range of investment strategies aimed at delivering superior risk-adjusted returns over the medium to long term. Magellan’s flagship funds, which invest in high-quality global companies, have been pivotal in establishing its reputation for consistent performance and rigorous risk management.

Magellan has been successful due to its disciplined investment philosophy, experienced management team, and strong track record of delivering returns to investors. The company is known for its conservative approach, prioritising capital preservation and long-term wealth generation, making it attractive to investors who seek stability and reliable income through dividends. Additionally, Magellan’s global investment strategies provide Australian investors with diversified exposure to international markets.

Magellan Financial Group has a dividend yield of 7.06% with a dividend cover ratio of 2.0.

Rio Tinto Ltd (Dividend Yield: 6.27%)

Rio Tinto is a leading global mining and materials company operating in 35 countries. The company’s primary focus is on extracting and processing minerals essential for global industries, including iron ore, aluminium, copper, and other critical minerals.

Rio Tinto’s success is largely attributed to its scale, diversified portfolio, and long-standing experience in the mining industry. The company has also been at the forefront of innovation, particularly in developing low-carbon products and sustainable mining practices, which appeal to environmentally conscious investors. Rio Tinto offers a combination of stable cash flow, consistent dividend payments, and exposure to essential materials driving global industrial and technological progress.

Rio Tinto has a dividend yield of 6.27% with a dividend cover ratio of 2.0.

Waypoint REIT Ltd (Dividend Yield: 6.20%)

Waypoint REIT [OY1] is Australia’s largest listed real estate investment trust that owns and manages a portfolio of fuel and convenience retail properties nationwide. The company generates long-term income and capital returns by managing a high-quality network of properties spread across all Australian states and mainland territories.

Waypoint REIT’s success is underpinned by its specialised focus on a stable and resilient asset class – fuel and convenience retail properties – which have proven less volatile than other commercial real estate sectors. Investors might find Waypoint REIT attractive due to its consistent dividend payouts, driven by long-term leases with reliable tenants, and its strategic focus on maximising returns for security holders.

Waypoint REIT has a dividend yield of 6.20% with a dividend cover ratio of 3.3.

NRW Holdings Ltd (Dividend Yield: 4.48%)

NRW Holdings is a leading provider of diversified contract services across Australia's resources and infrastructure sectors. The company operates through three main segments: Civil, Mining, and Minerals, Energy & Technologies.

In the Civil segment, NRW delivers infrastructure projects including road and rail construction, bulk earthworks, and mine development. The mining segment focuses on activities such as contract mining and mine management, as well as providing essential services like drill and blast, load and haul, and the fabrication of mining equipment. The Minerals, Energy & Technologies segment offers specialised services, including materials handling, industrial engineering, and onsite maintenance.

NRW Holdings is successful due to its broad range of services and its ability to adapt to the varying demands of the resource and infrastructure sectors. The company’s consistent revenue from the mining sector and its strategic acquisitions have strengthened its market position. Investors may find NRW attractive due to its diversified operations, steady growth prospects, and the ability to generate consistent cash flow from long-term contracts.
NRW Holdings has a dividend yield of 4.48% and a dividend cover ratio of 2.1.

QBE Insurance Group Ltd (Dividend Yield: 4.43%)

QBE Insurance Group is a leading international insurer and reinsurer in 27 countries. The company was founded in 1886 and is headquartered in Sydney, Australia. QBE offers a wide range of insurance products, including commercial, personal, and specialty lines such as property, auto, agriculture, public/product liability, professional indemnity, workers’ compensation, and marine, energy, and aviation insurance.

QBE has built a strong reputation for its deep expertise in risk management and its ability to provide tailored solutions for both individuals and businesses. The company’s global reach and diversified portfolio make it resilient to regional market fluctuations, offering a stable investment option for those interested in the financial sector. Investors like QBE for its consistent dividend payouts and its strategic focus on maintaining a strong capital base, which supports its ability to manage risks and deliver returns.
QBE Insurance Group has a dividend yield of 4.43% with a dividend cover ratio of 2.2.

AMP Ltd (Dividend Yield: 3.14%)

AMP Ltd is a well-established Australian financial services company founded in 1849. It provides various services across Australia and New Zealand, including banking, superannuation, retirement, investment management, and financial advice.

AMP operates through several segments: AMP Bank, which offers retail banking services such as home loans, deposits, and transaction accounts; Australian Wealth Management, which provides financial planning, investment, and superannuation products; and New Zealand Wealth Management, which offers similar services tailored to the New Zealand market. The company also has a significant presence in the investment management industry through AMP Capital, which manages a variety of assets including property and infrastructure.

Despite its long history, AMP has faced significant challenges in recent years, including regulatory scrutiny and declining profitability. However, the company continues to play a significant role in the financial services sector, and investors are often attracted by its efforts to streamline operations and improve financial performance.
AMP has a dividend yield of 3.14% with a dividend cover ratio of 1.9.

BlueScope Steel Ltd (Dividend Yield: 2.77%)

BlueScope Steel is a leading steel producer, primarily involved in manufacturing and distributing coated and painted flat steel products. The company operates across Australia, New Zealand, North America, and Asia, serving a diverse range of industries, including construction, automotive, and manufacturing.

BlueScope makes popular products like COLORBOND® steel, ZINCALUME® steel, and TRUECORE® steel, which are commonly used in construction. The company also runs a major steel plant in Ohio, USA, that produces hot rolled coil for various uses. BlueScope is a key player in the steel industry with its global reach, diverse operations, and focus on sustainability and innovation.

BlueScope Steel has a dividend yield of 2.77% with a dividend cover ratio of 3.3.

Ramelius Resources Ltd (Dividend Yield: 2.43%)

Ramelius Resources is a Western Australian-based gold producer focused on exploring, developing, and producing gold. The company operates several gold mines, including the Mt Magnet, Edna May, Marda, and Penny. These operations are complemented by ongoing exploration projects such as the Rebecca and Rose Gold Projects, which were acquired through strategic takeovers.

Ramelius Resources has been successful due to its strong focus on gold production within Australia, particularly in Western Australia, a globally recognised gold mining region. The company’s consistent production from its established mines, strategic acquisitions, and exploration activities have positioned it as a mid-tier gold producer. Investors are interested in Ramelius due to its solid track record in gold production, potential growth from its exploration projects, and its focus on enhancing shareholder value.

Ramelius Resources has a dividend yield of 2.43% and a dividend cover ratio of 5.0.

Perseus Mining Ltd (Dividend Yield: 1.92%)

Perseus Mining is an Australian-based gold producer with a strong focus on West Africa, where it operates three primary gold mines: Edikan in Ghana and Sissingué and Yaouré in Côte d’Ivoire. The company has successfully transitioned from an explorer to a significant gold producer, achieving its first gold production in 2011 at Edikan, with its other mines following in 2018 and 2020.

Perseus Mining has continued to expand its portfolio, acquiring additional projects like the Meyas Sand gold project in Sudan and the Nyanzaga gold project in Tanzania. The company’s success is built on its ability to bring mines into production efficiently and its strategic focus on underexplored regions in Africa. Investors might find Perseus attractive due to its solid production base, ongoing exploration potential, and the strategic positioning of its assets in regions known for high-grade gold.

Perseus Mining has a dividend yield of 1.92% and a dividend cover ratio of 4.8.

Past performance is not an indicator of future returns.

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