Highest Paying Dividend ASX Shares for 2021

Top 10 ASX Stocks That Pay High Dividend for 2021

Investors have different investment strategies, so an investor with a long term strategy, for instance, will be focused on the long term mean reversion and dividend yield of the stocks as compared to day traders who focus on the price volatility and timing the trades to benefit from capital gains.

Shares carry dividends as annual or periodic returns. Most companies declare annual returns but sometimes a company may also declare interim dividends to reward the shareholders in case of exceptional profits.

Dividends are one of the key factors that investors, as stated above look for in a stock. Retirement funds, investment funds and in general individuals looking to create wealth from their savings target stocks that carry stable, high or increasing returns in order to maximise the return on their investment.

While looking for high dividend paying companies, it is important to look out for a few factors.

Firstly investors need to check the profitability trends for a company. Companies with low profitability margins will not be able to pay a high or increasing dividend. A couple of years of low profitability is not an issue but if a company is constantly running low of profits then it will not be able to pay increasing dividends, at least not in the near future.

However high profitability is also not any guarantee of high dividends. A company may be churning profits annually but it may have a policy of reinvesting the profits to expand the operations of the company. Such a company will not declare dividends and thus shares of such a company would not be useful for the investors. Amazon is a prime example here, it does not pay out dividends, instead the shareholders benefit through the capital gains.

Dividend Yield

The dividend yield ratio is an important ratio when it comes to assessing the companies based on their dividend payout. The dividend yield is calculated by dividing the dividend with the market price of the share. Thus, the dividend share expresses the dividend in relation with the market price, thereby allowing the investors to compare the dividend allocated by the company with the share price.

Having a dividend yield ratio of 5% means that the company is paying off dividends that amount to 5% of the share value. For instance if an investor buys a share at $100 and the company pays a dividend at 5% then the dividend would be $5.

A high dividend yield shows that the company pays a high dividend which is generally a good sign but not always. A company may pay a high dividend to hide something serious. What the investors therefore need to look for is sustained level of dividend payout. A company that pays off a high dividend infrequently is not likely going to be a good choice but one that has a history of paying high dividends with stability or perhaps regularly increasing dividends.

It can also be argued that a company with a high dividend payout ratio may not have much funds to reinvest for growth. This will have to be considered by the investors at the time of making their investment decision.

Let us now look at some of the high dividend paying companies listed in the ASX

1-G8 Education Limited (GEM)

GEM has the highest dividend yield in the ASX at the moment. It has a dividend yield of 8.88% with its share price around AUD 1.2. GEM has a market capitalisation of over 1 billion and is expected to continue this dividend trend.

2-Cromwell Property Group (CMW)

CMW is close behind GEM. The dividend yield of CMW is 8.42%, with a price earnings ratio of 12.9. CMW has market capitalisation of over 2.3 billion. One reason for high dividend payout of CMW is that it is a REIT and REITs are by law required to pay out over 90% of their profit. Which is why REITs are a good investment option for investors looking to earn from dividends.

Read More: Best Performing Shares of 2020 in ASX

3-Flight Centre Travel Group Ltd (FLT)

FLT is also among the companies that have a high dividend yield of about 8.18%. Since FLT is based in the travel sector, the year 2020 has not been very good similarly 2021 is also expected to be lukewarm at best, which is why investors should be careful while investing in FLT as their dividend payout may possible reduce in 2021.

4-Fortescue Metals Group (FMG)

FMG has a dividend yield of 7.18%, although it is under 8% but it is still quite high. FMG has a P/E ratio that is around 10.3 which is a bit lower than the average industry ratio, which also means that the FMG stocks are slightly undervalued and therefore investors can buy then at a slight bargain.

5-IOOF Holdings Ltd (IFL)

IFL has a dividend yield of 7.45%, however since IFl is a REIT this means that the dividends are regular and depend on the revenue made by IFL.

Read More: What a Diverse Portfolio! How Many Companies Should I Buy Into?

6-AGL Energy Ltd – (AGL)

AGL limited has a dividend yield of 7.28% which is a good yield, especially now that we are looking at a company situated in the energy sector.

7-Spark Infrastructure Group (SKI)

SKi has a dividend yield of 6.8% with a P/E ratio of 47.7 which is quite a high P/E ratio. The market has greatly overvalued the shares of SKI, this maybe due to perceived positive sentiments and expectations such as future plans and projects. The construction sector is also expected to see large public sector investment in the next 10 years in Australia, which makes this sector and the companies there in ideal for investment right now.

8-Charter Hall Retail (CQR)

CQR is a REIT with a dividend yield of 6.57%. Although the dividend yield is low but the P/E for CQR again is quite high which shows that the market has attached positive sentiments with CQR.

Read More: How to Find the Next Hot Stock and When to Sell

9-Harvey Norman Holdings Limited (HVN)

HVN has a dividend yield of 6.55% and a P/E ratio of 11.6 which is well in line with the market average.

10-Aurizon Holdings Limited (AZJ)

AZJ has a dividend yield of 6.38% with a P/E ratio of 13.7, which is slightly higher than the market average. Which once again shows that the market has high expectations.

These were the 10 companies listed in the ASX with high dividend yields. If you intend to invest in these companies then make sure that you check out other vital financial indicators as well, as banking on the dividend yield alone is not a good investment habit.

Main Image Source: Pixabay

Also See: Five Upcoming ASX Companies That Are Worth Watching

5 Best Websites to Learn About Investing in The ASX in 2021

Dave Peterson

Dave Peterson Passion for adventure and sharing his life long journey with as many others as possible. "What lies behind us and what lies before us are tiny matters compared to what lies within us." HENRY S. HASKINS

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