The market is chugging along beautifully today with the S&P/ASX 200 Index (ASX: XJO) up 1.9%. But over the first quarter of FY23, the benchmark index moved lower by 1%. And it's down 11% year to date.
During turbulent times on the market, as we've had this year, investors often turn their attention to ASX 200 dividend shares because capital gains are likely to be lower for now.
Below we canvas the three ASX 200 shares that offered the best dividend yields in Q1 FY23.
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Magellan Financial Group Ltd (ASX: MFG)
Magellan is a fund manager that makes money by looking after other people's money. They invest their clients' funds and charge fees based on the amount invested and each investment's performance.
According to S&P Capital IQ data, Magellan had the highest dividend yield in Q1 FY23 of the ASX 200. It was 15.9% as of 30 September. A 15%-plus dividend yield sounds amazing, right? But there's a deeper story here, which is why investors must do their research before buying a dividend share (or any share, for that matter).
What's happened here is that the Magellan share price has absolutely cratered in 2022. The company is earning less money because investors have been withdrawing funds. So, Magellan is paying less money out in dividends, but the yield still looks great because of the severely weakened share price.
Tabcorp Holdings Limited (ASX: TAH)
Tabcorp is a wagering and media and gaming service business. It used to do lotteries as well before demerging that segment in May 2022, which resulted in the formation of Lottery Corporation Ltd (ASX: TLC). Most Aussies would know Tabcorp through its TAB brand both online and in venues.
The data shows Tabcorp had a dividend yield of 13.9% in Q1 FY23. If you're thinking of investing for dividends, something to check out here would be how the demerger might impact future dividends.
The trailing dividend would include part of the lotteries segment's earnings, which are no longer relevant for future payouts. But the Tabcorp share price has also tanked in 2022, so maybe the yield is sustainable.
South32 Ltd (ASX: S32)
The data shows South32 had a dividend yield of 13.3% in Q1 FY23.
South32 is a mining company with assets producing aluminium, manganese, coal, zinc, silver, and nickel.
With commodity prices going off in 2022, it's no surprise to see the dividend yield at such a strong level. However, dividend investors must be mindful that commodity prices can go up and down.
A higher commodity price means the company makes more on the stuff it digs out of the ground, while costs remain roughly the same. That means more profit to distribute to shareholders. And vice versa.
So, if you're buying South32 shares today for the long term (long-term investing is what we advocate here at The Fool), don't expect today's dividends to necessarily be the same tomorrow.
