This 8.4% ASX dividend stock is my top pick for immediate income

You may not have heard of this Kiwi business, but it has all its ducks in a row to keep rewarding investors.

| More on:
A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With share prices notoriously volatile and economic uncertainty striking fear into investors, it's no surprise many people are seeking the comfort of dividend shares.

But with the ASX packed with dividend payers, which one to choose?

You won't want to end up with a "dividend trap" that only has a high yield because of a falling share price, or a flailing business that could suddenly cut its distributions.

Here is one suggestion that could avoid all those pitfalls:

How does $350 monthly income sound?

New Zealand company Fletcher Building Ltd (ASX: FBU) is a construction materials provider that's listed on the ASX.

The stock is currently paying out a handy dividend yield of 8.4%.

Not only that, the latest reporting season showed that the business seems to be heading in the right direction.

"The company reported revenue of $4.3 billion, up 5% on the pcp of 1H FY22," said The Motley Fool's Bronwyn Allen in February.

"Earnings before interest and tax before significant items totalled $360 million, up 8%, with an improved EBIT margin of 8.4%."

Being a foreign company, no franking credits are given.

But even with an unfranked 8.4% yield, a $50,000 investment would provide shareholders with a $350 monthly income.

The outlook for construction stocks

Amid worries about rising interest rates impacting the construction industry, the Fletcher Building stock price has admittedly dropped 3.7% year to date.

Created with Highcharts 11.4.3Fletcher Building PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

However, Wilsons equity strategist Rob Crookston said last week the negative sentiment towards housing could make it a perfect contrarian play right now.

"The macro is starting to shift in the US and in Australia, with central banks looking close to the end of tightening cycles," he said.

"There are strong structural tailwinds behind the US and Australian housing markets."

There is even speculation that Fletcher could buy out Australian rival CSR Limited (ASX: CSR)

The Kiwi stock is a hit among professional investors at the moment.

Ten out of 14 analysts currently surveyed on CMC Markets rate Fletcher Building shares as a buy. Nine of those reckon it's a strong buy.

CMC Markets is predicting that Fletcher Building will maintain its dividend yield above 8% for the next year or two at least.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Share Market News

Buy these excellent ASX dividend shares for 5%+ yields

Analysts expect above-average dividend yields from these shares.

Read more »

farm workers examine an agricultural crop
Dividend Investing

Why I think this is a top ASX 300 stock to buy right now for passive income

Rural Funds can provide investors with a lot of income at the current valuation.

Read more »

A couple sit in front of a laptop reading ASX shares news articles and learning about ASX 200 bargain buys
Dividend Investing

1 ASX dividend stock down 40% I'd buy right now

This business could be a very good choice for healthy dividends.

Read more »

Happy young woman saving money in a piggy bank.
Dividend Investing

How to make $10,000 of passive income a year

Here's how to make the share market your own personal ATM.

Read more »

Blue chips with stock written on them.
Dividend Investing

2 ASX blue-chip shares offering big dividend yields

These businesses have a lot to offer income-focused investors.

Read more »

Woman laying with $100 notes around her, symbolising dividends.
Dividend Investing

How much dividend income does the average ASX investor earn?

It's an impressive amount!

Read more »

Person holding Australian dollar notes, symbolising dividends.
Dividend Investing

Which ASX 200 sector paid the best dividends in FY25?

We reveal the dividend returns of each of the 11 market sectors in FY25.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Dividend Investing

Are CBA shares still a good buy today for passive income?

Looking to earn passive income from ASX dividend stocks? Here’s my take on CBA shares.

Read more »