Telstra Corporation Ltd (ASX:TLS) is cutting its fully franked dividend, with some analysts predicting the Telstra dividend could fall as low as 14 cents per share within the next 3 years.
Australia and New Zealand Banking Group (ASX:ANZ) cut its dividend in 2016, and with the bank saying it expects difficult trading conditions “for the foreseeable future,” it’s looking unlikely shareholders will see a meaningful increase in the future ANZ dividend.
The dividends for the three other big banks have effectively flatlined as they all struggle to grow earnings.
All this comes at a time when economists are widely expecting the Reserve Bank of Australia (RBA) will keep interest rates on hold well into 2019.
The Capital Club has scoured the market, searching for some of the best dividend stocks on the ASX for 2018 and beyond.
As well as proprietary research, we’ve tapped into the stock holdings of some of the country’s top stock pickers and fund managers.
We’ve trended towards large-cap, blue chip income stocks, given their popularity, and also their lower risk profile.
Risk versus reward
That said, every stock has its risks.
Back in April 2015 when the Commonwealth Bank of Australia (ASX:CBA) share price was riding high at around $88, not many investors would have expected its share price to slump over 21 per cent, effectively a bear market for CBA shares.
Another “fallen hero” has been the QBE Insurance Group Ltd (ASX:QBE) share price. QBE shares have fallen around 33 per cent over the past 3 years.
These are big falls for so-called “safe” ASX blue chip shares.
Although there are risks, the rewards can be substantial.
Three years ago, when the Webjet Limited (ASX:WEB) share price was trading below $3, WEB shares were trading on an attractive, fully franked dividend yield.
Fast forward to today, and Webjet shares are trading at close to $13, a gain of close to 333 per cent. The fully franked dividend has been the icing on the cake.
The Treasury Wine Estates Ltd (ASX:TWE) share price has jumped more than 230 percent higher over the past 3 years.
For the long term
By definition, investing is for the long-term.
In a macro sense, that means investing for the rest of your life.
From a stock-specific perspective, that means holding until the underlying story changes, usually for the worse.
Telstra, Commonwealth Bank and QBE are good examples of the story changing, for the worse.
For Telstra, the NBN was a game-changer, where Telstra are now forced to compete on the exact same playing field as a host of more nimble competitors.
For CBA, a combination of increased regulation, highly indebted consumers, slumping property prices and lately, the fall-out from the banking royal commission have been the game changers.
For QBE, continuing poor underwriting results resulted in the company no longer being able to grow by acquisition.
6 of the best ASX dividend shares for 2018 and beyond
I’m expecting these 6 companies to keep growing long into the future.
1) BHP Billiton
There’s nothing necessarily original in selecting BHP Billiton Limited (ASX:BHP), the largest company quoted on the ASX.
The BHP share price has had a great run, rising from around $15 in early 2016 to around $34.
But, as David Allingham at Eley Griffiths said recently, BHP shares “still look cheap even though they have had a good run.”
According to Commsec, at around $34, the BHP share price asx trades on an attractive forecast fully franked dividend yield of 4.7 per cent.
2) Macquarie Group
Macquarie Group Ltd (ASX:MQG) differs from the big four banks in that it has a global footprint, and its profits are derived more from its fund management business than traditional banking.
Funds management can be a lucrative business. At scale, and with superior investing performance, customer retention is high, giving fund managers a high level of recurring revenue.
The Macquarie Group share price has had a good run, jumping 30 per cent higher over the past 12 months.
New fund Airlie Australian Share Fund recently named Macquarie shares as one of its quarterly stocks in focus.
At around $113, Macquarie shares trade on a forecast dividend yield of 4.8 per cent.
3) Transurban Group
Transurban Group (ASX:TCL) is the dominant toll road developer and operator in Australia, with holdings also in North America.
Transurban has the ultimate competitive advantage, courtesy of its rights to toll motoring customers on high traffic roads for between 8 and 69 years, depending on the concession.
The Transurban share price has lost 5 per cent over the past 12 months, but is up almost 75 per cent over the past 5 years.
At around $11.70, Transurban shares trade on a forecast dividend yield of 4.8 per cent.
4) Sydney Airport Holdings
Sydney Airport Holdings Pty Ltd (ASX:SYD) is the owner and manager of the Sydney Airport.
Like Transurban, it also has a massive competitive advantage, given Sydney currently only has one international airport
At its recent AGM, new CEO Geoff Culbert said Sydney Airport had “significant growth potential”, a big part of it coming from opportunities they are seeing around international traffic.
The Sydney Airport share price has lost a modest 2 per cent over the past 12 months, but is up over 100 per cent over the past 5 years.
At around $7.10, Sydney Airport shares trade on a forecast dividend yield of 5.3 per cent.
5) JB Hi-Fi
Despite a recent stumble, Ellerston Capital recently said their original thesis for investing in JB Hi-Fi Limited (ASX:JBH) shares remains intact.
The fund manager is attracted to JB Hi-Fi shares as the brand has by far the lowest cost of doing business in Australia, is a price leader, and is winning in the market place.
The JB Hi-Fi share price has been sold down on fears about Amazon’s entry into the Australian market such that Ellerston says JB Hi-Fi shares are trading at a significant discount to the share market.
The JB Hi-Fi share price has gained around 8 per cent over the past 12 months, and is up over 50 per cent over the past 5 years.
At around $23.40, JB Hi-Fi shares trade on a forecast fully franked dividend yield of 5.6 per cent.
6) Nine Entertainment
In March, the top performing QVG Opportunities Fund revealed Nine Entertainment Co Holdings Ltd (ASX:NEC) as one of their top five holdings.
In their May letter to investors, QVG said traditional media was one of its favoured sectors, with Nine Entertainment still amongst the fund’s top 5 holdings.
Nine is in an upgrade cycle, with strong ratings momentum coupled with excellent progress on premium and digital TV having the potential of driving earnings upgrades into the future.
The Nine Entertainment share price has gained over 90 per cent over the past 12 months, making it one of the top ASX 200 performers.
At around $2.45, Nine shares trade on a fully franked dividend yield of 4.1 per cent.