Top 10 ASX dividend stocks to watch in December 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 December 2024. While they may not necessarily represent the best long-term growth investments, they have garnered significant investor interest.

1. Prestal Holdings Ltd (ASX: PTL)
2. Zimplats Holdings Ltd (ASX: ZIM)
3. Horizon Oil Ltd (ASX: HZN)
4. New Hope Corporation (ASX: NHC)
5. COG Financial Services (ASX: COG)
6. Elanor Commercial Property Fund (ASX: ECF)
7. Tamawood Ltd (ASX: TWD)
8. McPherson’s Ltd (ASX: MCP)
9. Fletcher Building Ltd (ASX: FBU)
10. Mitchell Services (ASX: MSV)

Prestal Holdings (Dividend Yield: 80.5%)

Prestal Holdings Ltd, formerly Pental Limited, operates within the consumer goods sector, primarily focusing on household products and e-commerce ventures. A crucial part of its portfolio is Hampers with Bite, an e-commerce gifting brand acquired in 2020, which has become a leading supplier of gift hampers in Australia. The business has capitalised on the rising demand for premium, curated gifting options, underpinned by its strong online presence and the shift toward digital shopping.

With a market capitalisation of approximately AUD 14 million, Prestal Holdings has made strategic moves to streamline its operations, including divesting its Shepparton manufacturing facility for AUD 15 million earlier this year. The company’s emphasis on efficiency and its ability to adapt to changing market conditions makes it an interesting choice for investors seeking exposure to the e-commerce and household goods sectors. While the stock has faced challenges, such as declining dividends and mixed shareholder returns, its pivot toward profitable niches and operational focus may offer long-term potential for patient investors.

Currently, Prestal Holdings has a dividend yield of 80.5% with a dividend cover ratio of 7.1.

Zimplats Holdings Ltd (Dividend Yield: 19.3%)

Zimplats Holdings Ltd is a prominent player in the mining sector, focusing on platinum group metals (PGMs) and associated materials like nickel, gold, and copper. Operating primarily in Zimbabwe, the company mines rich deposits along the Great Dyke and manages five underground mines alongside advanced processing facilities. Its output includes platinum, palladium, rhodium, and other valuable metals, all marketed as white matte, making Zimplats a critical supplier in global precious metal markets.

Zimplats’ success is underpinned by its efficient operations and strategic positioning within the PGM industry. As a subsidiary of Impala Platinum BV, it benefits from strong corporate backing and technical expertise. The company has maintained robust mining and refining operations while navigating regional and global challenges. Its steady revenue stream and capacity to produce metals crucial for automotive and industrial applications make Zimplats a compelling choice for investors seeking exposure to the materials sector.

Currently, Zimplats Holdings has a dividend yield of 19.3% with a dividend cover ratio of 2.1.

Horizon Oil Ltd (Dividend Yield: 15.8%)

Horizon Oil Ltd is a dynamic player in the energy sector, specialising in oil and gas exploration, development, and production across Australia, New Zealand, and China. With a robust portfolio of assets, the company focuses on proven hydrocarbon-rich basins, ensuring a steady production and revenue stream. Its strategy hinges on leveraging operational efficiency and exploring untapped reserves to maintain consistent growth.

What sets Horizon Oil apart is its disciplined capital management, highlighted by a strong focus on shareholder returns, including dividend distributions. The company has achieved notable milestones, such as optimising production from established assets and expanding its reserves. Given its competitive cost structure, strategic geographic footprint, and commitment to sustainable operations, Horizon Oil remains a stock to watch for investors seeking exposure to the energy market.

Currently, Horizon Oil Ltd has a dividend yield of 15.8% with a dividend cover ratio of 1.7.

New Hope Corporation (Dividend Yield: 14.2%)

New Hope Corporation is a leading Australian energy company focusing on thermal coal mining. With operations spanning the New Acland mine in Queensland and the Bengalla mine in New South Wales, the company has built a reputation as a reliable coal supplier for export markets. Recent investments, including the expansion of New Acland’s Stage 3 project, will significantly boost its annual production capacity in the coming years. Beyond coal, New Hope maintains diversified interests in oil, gas, and pastoral activities, highlighting a strategic approach to resilience in the energy sector.

The company’s substantial reserves and efficient operations have cemented its position in the global seaborne coal market. New Hope also benefits from long-term resources and export capabilities, including ownership of port handling infrastructure like Queensland Bulk Handling. Despite industry challenges, the corporation’s steady financial performance and dividend yields make it appealing to investors seeking exposure to energy commodities. As the energy transition evolves, New Hope’s adaptability and established market presence position it as a stock to monitor closely.

Currently, New Hope Corporation has a dividend yield of 14.2% with a dividend cover ratio of 1.7.

COG Financial Services (Dividend Yield: 14.1%)

COG Financial Services is a leader in Australia’s equipment finance industry, catering to the small and medium enterprise (SME) sector. The company operates through key segments, including finance broking and aggregation, novated leasing, and asset management, supporting businesses in acquiring essential equipment. Its finance aggregation model enables smaller brokers to leverage larger-scale operations for enhanced profitability, making COG a cornerstone of financial services for SMEs.

A standout feature of COG is its steady growth trajectory. With a reported revenue of approximately $499 million in 2024, marking a 36% increase year-on-year, the company demonstrates its ability to scale in a competitive industry. Moreover, its robust dividend yield and strategic acquisitions highlight a commitment to shareholder value. Positioned at the intersection of financial services and essential business support, COG is an intriguing prospect for investors seeking exposure to SME growth in Australia.

Currently, COG Financial Services has a dividend yield of 14.1% with a dividend cover ratio of 2.8.

Elanor Commercial Property Fund (Dividend Yield: 13.6%)

Elanor Commercial Property Fund is a real estate investment trust (REIT) focused on generating strong, risk-adjusted returns through strategic investments in Australian commercial office properties. Since its ASX listing in 2019, the fund has curated a portfolio of seven high-quality office assets valued at $374 million, primarily located in major metropolitan areas and established commercial precincts. By targeting government, multinational, and ASX-listed tenants, the fund benefits from stable, long-term rental income streams, providing investors with dependable returns.

ECF's disciplined investment strategy is underpinned by proactive asset management to enhance portfolio performance. Despite challenges in the commercial real estate sector, the fund has maintained a robust dividend yield, appealing to income-focused investors. With a portfolio aligned with resilient tenant demand and a focus on value creation, ECF represents an intriguing option for those seeking exposure to the commercial property market.

Currently, Elanor Commercial Property Fund has a dividend yield of 13.6% and a dividend cover ratio of 1.

Tamawood Ltd (Dividend Yield: 13.1%)

Tamawood Ltd is a well-established Australian company specialising in residential construction, design, and project management. Headquartered in Brisbane, Queensland, the company is renowned for its innovative home designs and operates under brands like Dixon Homes and SolarpowerRex. Tamawood’s business model includes constructing contract homes, "ready-to-occupy” properties, franchising, and licensing services, making it a big player in Australia’s housing sector.

Tamawood’s success is built on a blend of quality design, customer-centric services, and a solid financial foundation. The company has positioned itself as a leader in the competitive residential construction market with consistent revenue growth, a reputation for reliability, and a focus on sustainable practices such as incorporating solar solutions. This strong track record and ongoing demand for housing in Australia make Tamawood an intriguing stock for investors seeking exposure to the property sector.

Currently, Tamawood Ltd has a dividend yield of 13.1% with a dividend cover ratio of 1.4.

McPherson’s Ltd (Dividend Yield: 13%)

McPherson’s Ltd is a well-established name in the health, wellness, and beauty sectors, with roots tracing back to 1860. Headquartered in Kingsgrove, Australia, the company has a significant footprint across Australia, New Zealand, and Asia. McPherson’s owns and markets iconic brands such as Dr. LeWinn’s, A’kin, Manicare, Lady Jayne, and Swisspers, offering products that range from skincare and haircare to vitamins and kitchen essentials like cling wraps and baking paper. These products cater to everyday needs and premium beauty segments, showcasing the company’s broad market appeal.

The company has maintained resilience through strategic brand investments and a diverse product portfolio. By leveraging e-commerce and traditional retail channels, McPherson’s has stayed relevant in a competitive landscape. However, like many consumer-focused businesses, it faces challenges such as fluctuating consumer demand and supply chain pressures. With its commitment to innovation and sustainability, McPherson’s remains a stock worth watching for those interested in the consumer staples sector.

Currently, McPherson’s Ltd has a dividend yield of 13% with a dividend cover ratio of 2.9.

Fletcher Building Ltd (Dividend Yield: 12.8%)

Fletcher Building Ltd is a leading building materials company based in New Zealand, with operations across Australasia. With a diversified portfolio, the company operates in building products, concrete, steel, distribution, and residential and commercial construction sectors. Its core revenue streams are anchored in housing construction, complemented by contributions from commercial and infrastructure projects.

Fletcher Building has shown resilience in navigating the cyclical nature of its industry by diversifying its offerings and maintaining a strong market presence. Its strategy includes leveraging sustainable practices and expanding its footprint in Australia, tapping into infrastructure and construction growth opportunities. As urbanisation and housing demands persist, Fletcher Building remains a stock to watch for its ability to adapt and deliver consistent value to investors.

Currently, Fletcher Building Ltd has a dividend yield of 12.8% and a dividend cover ratio of 3.2.

Mitchell Services Ltd (Dividend Yield: 11.9%)

Mitchell Services Ltd is a leading provider of drilling services to Australia's mining and resources sector. Established in 1984, the company has built a strong reputation for delivering high-quality, reliable, innovative drilling solutions. With a diverse fleet of modern drilling rigs and a team of experienced professionals, Mitchell Services caters to a wide range of clients, from junior explorers to major mining companies. Their comprehensive service offering includes exploration, production, and underground drilling, making them a one-stop shop for all drilling needs.

What sets Mitchell Services apart is its commitment to safety, sustainability, and technological advancement. The company continuously invests in state-of-the-art equipment and training programs to ensure they remain at the forefront of the industry. This dedication to excellence has earned them long-term contracts with some of the biggest names in mining. As the demand for minerals and resources continues to grow, Mitchell Services is well-positioned to capitalise on new opportunities, making it a stock to watch for investors seeking exposure to the robust mining sector.

Currently, Mitchell Services Ltd has a dividend yield of 11.9% and a dividend cover ratio of 4.9.

Past performance is not an indicator of future returns.

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