85% of companies in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) lifted or increased their dividends at the recent reporting season, according to research by Commsec.
And there are currently more than 190 ASX-listed companies with trailing dividend yields of more than 5% according to data by CapitalIQ. Sure, some of them, particularly mining services, won't be able to maintain those yields next year even if they pay dividends. Other companies are likely to pay even higher dividends.
As we wrote earlier today, Australia's Future Fund targets a return of around 7% — a fully franked dividend yield of 5% gets you a grossed up yield of 7.1%. You don't need much capital growth (or any) to beat the Sovereign Wealth Fund's target.
Here're 10 dividend payers paying out a yield of 5% or more…
| Company | Trailing Yield |
| BHP Billiton Limited (ASX: BHP) | 5.0% |
| Tamawood Limited (ASX: TWD) | 7.1% |
| G8 Education Limited (ASX: GEM) | 7.4% |
| Dick Smith Holdings Limited (ASX: DSH) | 8.5% |
| Automotive Holdings Group Ltd (ASX: AHG) | 5.4% |
| Woolworths Limited (ASX: WOW) | 5.5% |
| Wesfarmers Ltd (ASX: WES) | 5.0% |
| Virtus Health Ltd (ASX: VRT) | 5.4% |
| Australia and New Zealand Banking Group (ASX: ANZ) | 6.6% |
| ASX Limited (ASX: ASX) | 5.0% |
| Telstra Corporation Ltd (ASX: TLS) | 5.4% |
Source: CapitalIQ
Owning a selection of high dividend payers, particularly those that can increase their dividends significantly over time is a useful strategy when it comes to investing.
Most of the companies above should be able to generate higher dividends or at least maintain the existing dividend payouts in the year ahead.
Some companies like Woolworths could see earnings fall, but they are still unlikely to lower the dividends much, unless something adverse occurs. That also gives investors buying in now the ability to participate in a turnaround in the share price over the long-term.
The bonus of investing for the yield is that if you are holding for the long-term, short-term market gyrations should have very little effect on you – except to perhaps top up your holdings.
Another benefit is that a number of studies have shown that high dividend paying stocks tend to outperform the market over the long-term. That may be because companies have to be more careful with their capital, and as such tend to have better management teams (capital allocators) – unless they are Warren Buffett of course!
That's why I have a decent selection of high dividend stocks in both my SMSF and personal portfolio. If you don't, now might be the time to consider it.
