The dreaded 'i' words — inflation and interest rates — have monopolised financial headlines for most of the year. As such, whilst the S&P/ASX 200 Index (ASX: XJO) has delivered average capital growth of around 8% per annum over the past 20 years, it has fallen painfully short of this in 2022.
But, even during years when the stock market is struggling and share price gains are more difficult to lock in, it's still possible for investors to build wealth. One way of doing this is by owning dividend shares.
We asked our Foolish contributors which ASX dividend shares they reckon are 'cracker' buys in December for some new-year passive income. Here's what the team came up with:
7 best ASX dividend shares for December 2022 (smallest to largest)
Universal Store Holdings Ltd (ASX: UNI), $387.44 million
Adairs Ltd (ASX: ADH), $380.32 million
Codan Limited (ASX: CDA), $681.19 million
TechnologyOne Ltd (ASX: TNE), $4.51 billion
Medibank Private Ltd (ASX: MPL), $8.15 billion
Westpac Banking Corp (ASX: WBC), $81.79 billion
BHP Group Ltd (ASX: BHP), $236.87 billion
(Market capitalisations as at market close on 12 December 2022)
Why our Foolish writers love these ASX dividend shares
Universal Store Holdings Ltd
What it does: Universal Store is an omnichannel retailer focused predominately on the youth apparel industry through its Universal Store and Thrills brands. The company is also trialling the Perfect Stranger brand as a standalone retail concept.
By James Mickleboro: Although the retail sector is facing some tough times due to the cost of living crisis, I believe Universal Store is well-placed for further solid sales growth, thanks to its focus on younger consumers. That's because the company's target demographic will be less impacted by rising interest rates and also stands to benefit from an increase in the minimum wage.
Combined with its store expansion plans, I believe Universal Store can deliver robust earnings and dividend growth for the foreseeable future. Goldman Sachs expects this to be the case and is forecasting fully-franked dividends per share of 26.1 cents in FY 2023, 29.9 cents in FY 2024, and 33.2 cents in FY 2025. Based on the latest Universal Store share price of $4.71, this equates to yields of 5.5%, 6.3%, and 7%, respectively.
Motley Fool contributor James Mickleboro does not own shares in Universal Store Holdings Ltd.
Adairs Ltd
What it does: Adairs is a retailer of homewares and furniture with three different businesses – Adairs, Mocka, and Focus on Furniture.
By Tristan Harrison: Adairs has major plans to grow its product range and increase its market share. The company says there is a strong link between retail floor space and sales and, in turn, between sales and membership numbers.
Adairs is looking to grow its floor area by 5% per annum over five years and thinks it can increase its total members from around one million (as at the end of FY22) to 1.5 million over this time.
Furthermore, the company has plans to add 30 new Focus on Furniture stores nationwide and grow online sales across each of its businesses. It's also planning to sell online-only business Mocka's furniture in its bricks and mortar stores in future, creating further synergies.
Adairs wants to increase its sales from $564.6 million in FY22 to more than $1 billion over five years.
After a 45% fall of the Adairs share price in 2022, Commsec numbers imply an 11.6% grossed-up dividend yield in FY23.
Motley Fool contributor Tristan Harrison does not own shares in Adairs Ltd.
Codan Limited
What it does: Codan may not be a household name, but the products it manufactures and supplies span broadly. After acquiring Zetron and Demo Tactical Communications (DTC), the Adelaide-based company is now heavily involved in communications technology used in defence, emergency response, and sporting sectors.
In addition, Codan makes and sells advanced metal-detecting devices under its popular Minelab brand.
By Mitchell Lawler: I originally highlighted Codan back in our August instalment of top ASX dividend shares. Unfortunately, six days later in its FY 2022 results, Codan pointed to a weak outlook for its metal detector segment. Since then, the Codan share price has tumbled 57% – not my finest display!
However, I believe the sell-off is overdone, and investors lack appreciation for the value in Codan's communications business.
DTC received its largest-ever order for supplying software-defined mesh radios to the military in FY22, and Zetron is one of only two full-suite integrated emergency response technology providers globally. All of this for a price-to-earnings (P/E) ratio of 6.7.
Given the critical nature of its products, Codan might be able to lift prices with inflation. I believe the company's 20% bottom-line margin suggests a reasonable level of pricing power exists. Codan currently offers a dividend yield of 7.5%.
Motley Fool contributor Mitchell Lawler does not own shares in Codan Limited.
TechnologyOne Ltd
What it does: TechnologyOne develops and provides enterprise software to clients across industries, including government, education, utilities, and financial services.
By Brooke Cooper: I often highlight strong balance sheets and competitive advantages as some 'green flags' I look for in a stock, and I think TechnologyOne has both in spades.
The company boasted $175.9 million of cash and no debt at the end of financial year 2022 while its customer retention sat at industry-leading levels – more than 99% for the period.
The company also posted record full-year profits and currently offers a dividend yield of around 1%. Whilst this yield may not sound overly enticing right now, I believe the company has the potential for significant growth and, thereby, higher payouts in the future.
Looking to the future, TechnologyOne is targeting $500 million of annual recurring revenue by financial year 2026 and expects to continue doubling in size every five years.
Motley Fool contributor Brooke Cooper does not own shares in TechnologyOne Ltd.
Medibank Private Ltd
What it does: Medibank is an Australian health insurance company that provides services to around 3.9 million Australians via its Medibank and AHM brands.
By Matthew Farley: The Medibank share price currently trades near the bottom of its 52-week range, which I believe makes it potentially undervalued. As at Monday's close, the company's shares were trading hands for $2.96, with a dividend yield of 4.53%.
One expert from global fund manager Schroders believes the sell-off in Medibank shares after the company's data breach in November is partially irrational. The investing team at QV Equities appears to agree, having recently used the opportunity to scoop up additional shares for its portfolios.
I believe Medibank is a defensive stock worth considering for today's volatile market conditions and uncertain economic outlook.
Motley Fool contributor Matthew Farley does not own shares in Medibank Private Ltd.
Westpac Banking Corp
What it does: Westpac is an ASX 200 blue chip that needs little introduction. It is one of the largest retail banks in the country and is also one of the oldest companies in Australia.
By Sebastian Bowen: Most ASX bank shares have a well-earned reputation as generous dividend payers, and Westpac is no different. After COVID crippled Westpac's shareholder payments, the bank has spent the past two years finding its dividend feet. In 2022, Westpac will dole out $1.25 in dividends per share, a nice increase over 2021's total of $1.18.
ASX broker Morgans has recently come out with an add rating on Westpac. It's expecting Westpac shares to rise to $25.80 apiece over the coming 12 months and pay out attractive dividends going forward.
At Monday's closing price of $23.36, Westpac shares offer a fully-franked dividend yield of more than 5%.
Motley Fool contributor Sebastian Bowen does not own shares in Westpac Banking Corp.
BHP Group Ltd
What it does: BHP is among the world's largest producers of iron ore with a growing footprint in the copper sector. The S&P/ASX 20 Index (ASX: XTL) miner is the largest company, by market cap, on the ASX.
By Bernd Struben: BHP is a long-term reliable dividend stock, traditionally paying two fully-franked dividends each year. The miner also offers a dividend reinvestment plan (DRP).
With iron ore and copper prices soaring in early 2022, BHP paid some outsized dividends. Shares currently trade on a trailing yield of 10.1%. Whilst that's unlikely to be sustainable long term, Citi does forecast a resilient iron ore price for 2023, potentially retesting US$150 per tonne.
And Goldman Sachs forecasts that the copper price could hit new record highs next year. Should that eventuate, it could mean another year of outsized dividends.
The BHP share price is up 10% year to date.
Motley Fool contributor Bernd Struben does not own shares in BHP Group Ltd.
