Results season is kicking into full swing, and so far so good, with a number of ASX 200 stocks reporting strong profit growth and increased fully franked dividends.
With dividend shares, as with all investing, the key is to have a diversified portfolio, both in terms of the number of individual holdings, and across sectors.
A portfolio where 60 per cent of your wealth is held in four bank shares is not diversified!
Because these 3 stocks are large companies with relatively limited growth prospects, don’t expect much in the way of capital gains.
But with interest rates likely to stay around these low levels until 2020, by comparison, these 3 dividend stocks are attractive for income seeking investors.
As an added bonus, all 3 pay fully franked dividends.
The Tabcorp Holdings Ltd (ASX:TAH) share price has jumped 10 per cent higher after the gaming giant reported pleasing results.
“During the year we accelerated digitalisation across the company, launched new products and implemented new licences,” chief executive David Attenborough said in a statement.
“The group delivered a positive second-half performance and we are well positioned for profitable growth and sustainable returns to shareholders.”
Back in February, the Ellerston Australian Share Fund added Tabcorp shares to its portfolio, saying the market failed to recognise the significant improvement in the earnings outlook post the merger of Tatts Group.
Tabcorp announced a full year fully franked dividend of 21 cents per share. With the Tabcorp share price trading at close to $5, the shares trade on a fully franked dividend yield of 4.2 per cent, or 6 per cent when grossed up for franking credits.
Commonwealth Bank of Australia
The Commonwealth Bank of Australia (ASX:CBA) share price jumped higher after the bank reported underlying cash profits of $10 billion.
Against expectations, CBA also raised its full year dividend to $4.31.
Absent a full blown house price crash, the dividend looks safe. With CBA shares trading at close to $76, they trade on a fully franked dividend yield of 5.7 per cent, or 8.1 per cent when grossed up for franking credits.
Because I think CBA shares are likely to trade in a narrow band of between around $70 and $80, this is not a stock for capital gains. But the dividend yield is compelling.
The Suncorp Group Ltd (ASX:SUN) share price jumped 6 per cent higher after the insurance and banking company reported a 34 per cent uplift in second half profits.
Looking ahead, Suncorp is forecasting accelerated top line growth of between 3 and 5 per cent on a flat expense base.
Suncorp rewarded shareholders by maintaining its full year dividend, and paying an 8 cent per share special dividend. This brought the total full year fully franked dividend to 81 cents per share, an 11 per cent increase on the prior year.
With Suncorp shares trading around $16, including the special dividend, they trade on a fully franked dividend yield of 5.1 per cent, or 7.2 per cent when grossed up for franking credits.