When companies have excess capital from profits or one-off sales, they can choose to return money to investors via paying a dividend. Dividends are very common for well established mature Australian businesses. Thanks to our imputation tax system in Australia, dividends can offer a very lucrative return for investors. Find out more information on dividend tax here: In Depth Share Taxation
Arguably the most important thing when assessing these dividend-paying companies is their yield ratio. This shows how much a company pays out in dividends each year as a percentage of invested capital. Simply put it’s how much you’re going to make. Most ASX companies pay two dividends a year: an interim and final dividend. So which stocks are paying the biggest dividends right now?
ORA is a tailored packaging company which allows the design and manufacture of packaging products such as bottles, cans, paper bags and point of purchase displays. Their current stock price is $3.09, with a market cap of $2.8B. Last year they paid a dividend of $0.581 ($0.493 net and $0.0883 credit). This gives them a yield of 15.95% net and 18.54% gross. Their share price has been relatively stagnant over a five-year period. The reason for the large yield is from a one-off special dividend. Their usually dividend is around $0.15 giving them a more realistic yield of 4.8%. Prophet considers them a HOLD.
Fortescue Metals 16.29%
FMG is a company in the space of exploration, development, production, and sale of iron ore. Their current share price is $21.66, with a market cap of $66B. Since 2019 their dividend payout exploded, jumping from $0.329 to $1.629, a massive 395% jump. last year it was even higher at $2.1 ($1.47 net and $0.63 credit), they are fully franked with a net yield of 11.4% and gross of 16.29%. Their dividend jumped after a massive jump in profits which also sent the share price sky high. Prophet Considers them a BUY.
AMP Ltd 12.59%
AMP is a massive banking company in Australia that provides services in the financial advice, superannuation, banking, and investment spaces. Their current share price is $1.135., with a marketcap of $3.9B. The company has maintained a good history of paying dividends to shareholders. Since 2019 their dividend was reduced significantly. Their share price has suffered in the past 2.5 years following the royal commission into Australian banking which crippled AMP, reducing profits and thus the reduction in dividends. Their current dividend rate is $0.143 ($0.1 net and $0.0429 credit) giving them a yield of 8.81% net and 12.59% gross. Prophet considers them a HOLD.
AGL Energy 12.57%
AGL is an energy provider that includes electricity generation, gas storage and the retail sale of electricity and gas to residential, business and wholesale customers. Their current share price is $8.71, with a market cap of $5.4B. They have a reliable history of an 80% franked dividend. Last year their paid out $1.316 in dividends ($0.98 net and $0.336 credits) giving them a yield of 10.56% net and 12.57% gross. Their massive dividend ratio is mostly attributed to a drop in share price following a revenue reduction for the previous year. Prophet Considers them a SELL
Perenti Global 12.44%
PRN (formerly Ausdrill limited) is a diversified mining services company, with businesses in surface mining, underground mining, and mining support services. Their current share price is $1.085, giving them a market cap of $764M. They have a poor history of dividend payments with 2020 being their first dividend. This year they paid put $0.1 to investors ($0.07 net and $0.03 credit). This gives them a yield of 9.68% net and 1244% gross. Prophet considers them a HOLD.
That completes the list of the five highest yielding dividend stocks in Australia right now as of April 2021. A main point I wanted to make in this article is that not all dividend stocks are solid investments. Often a massive dividend yield can be a red flag as it may be altered due to a massive fall in share price, poor prospects or a special dividend. For this reason, it is important to consider the business as a whole. A study conducted by SSgA found that 65% of companies with yields over 10% saw a reduction in share price averaging 20% in the preceding year.
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