With an average dividend yield of around 4%, the Australian share market is one of the most generous in the world.
As a comparison, over in the United States the S&P 500 index currently provides an average dividend yield of 1.9%, according to Multipl.
But with so much choice, it can be hard to decide which dividend shares to add to your income portfolio.
With that in mind, I thought I would look at three popular dividend shares to see if they were in the buy zone. They are as follows:
Australia and New Zealand Banking Group (ASX: ANZ)
Australia's big four banks have rallied strongly since the surprise election result last month. During this time the ANZ share price has put on a gain of almost 11% and is nearing its 52-week high. Despite this, its shares are still trading on lower than average multiples and offer a very generous trailing 5.6% dividend yield. I think this makes ANZ an attractive option, especially given its strong capital position, share buybacks possibilities, and cost cutting opportunities. I expect these alone to put ANZ in a position to grow its underlying earnings per share at a modest rate over the near term. This could be given an extra boost if the housing market rebounds and leads to solid mortgage loan growth.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
I'm a big fan of Sydney Airport and believe it is a high-quality company. It has also proven to be a great investment in 2019, rising over 15% since the turn of the year to leave it trading within sight of its all-time high. However, I would class its shares as a hold now after this strong run and due to signs that the Australian tourism boom could be running out of gas. This, combined with capacity cuts by major airlines, could limit its profit and dividend growth in the near term.
Transurban Group (ASX: TCL)
This toll road giant's shares have also been on form in 2019. Earlier today Transurban's shares hit an all-time high of $14.60, stretching their year-to-date gain to an impressive 26%. This strong gain has been driven by a positive performance in FY 2019, the recent Westconnex acquisition, and increasing demand for bond proxies amid falling bond yields. Whilst I think the upside for its shares may be limited over the near term, I would still buy Transurban for its trailing distribution yield of 4%. I believe this could grow at a solid rate over the coming years thanks to increasing traffic on its roads and periodic toll rises.
