With inflation still running hot, many investors are understandably attracted to ASX shares offering high dividend yields.
After all, if you can earn 5%, 6%, 7% or even more on your money, this can go a long way in helping offset today's surging cost of living.
But just because a stock is trading on a lofty dividend yield doesn't necessarily make it a good investment.
A high yield can reflect low investor confidence and, thus, a falling share price. It can also be the result of a one-off special dividend payment that won't be repeated any time soon.
So, we asked our Foolish writers to sort the treasure from the trash and tell us which high-yielding ASX dividend shares they think are worth buying right now.
Here is what they told us:
6 best high-yielding ASX shares for July 2024 (smallest to largest)
- Shaver Shop Group Ltd (ASX: SSG), $154.59 million
- Rural Funds Group (ASX: RFF), $811.43 million
- Nick Scali Limited (ASX: NCK), $1.21 billion
- IPH Ltd (ASX: IPH), $1.55 billion
- Vanguard Australian Shares High Yield ETF (ASX: VHY), $3.84 billion
- Bendigo and Adelaide Bank Ltd (ASX: BEN), $6.65 billion
(Market capitalisations as of market close 12 July 2024).
Why our Foolish writers love these ASX dividend stocks
Shaver Shop Group Ltd
What it does: Shaver Shop sells personal grooming products for men and women. It currently has 123 Shaver Shop stores across Australia and New Zealand and retails through its own websites, as well as eBay, Amazon, TradeMe, and MyDeal online marketplaces.
By Tristan Harrison: When it comes to investing for a high dividend yield, I look for ASX dividend shares that have fairly good track records of consistently paying dividends. I'm not interested in just one good year of big payments.
Shaver Shop has grown its annual dividend payout every year since it first started paying dividends in 2017, which is an impressive record considering it's an ASX retail stock.
While that dividend record isn't guaranteed to continue amid this high cost of living era, I'd suggest personal grooming products may have fairly consistent demand. After all, hair keeps growing in all economic conditions!
The latest two dividends declared by Shaver Shop amount to 10.2 cents, which translates into a fully franked dividend yield of 8.6%, or 12.2% grossed-up with the franking credits. Of course, it's possible the next two declared dividends may not be quite as large. But, even a 10% dividend reduction would still translate into a double-digit grossed-up dividend yield.
Furthermore, I believe Shaver Shop can increase its profit over the long term by growing its store network, increasing its online sales, improving efficiencies/margins, and expanding its product range. The business retails various products across oral care, hair care, massage, air treatment, and beauty categories.
Motley Fool contributor Tristan Harrison does not own shares of Shaver Shop Group Ltd.
Rural Funds Group
What it does: Rural Funds Australia is a real estate investment trust (REIT) focused on agricultural assets across Australia.
By Kate Lee: In addition to dividend yields, two other important considerations for dividend investing are the sustainability of future dividends and the potential for invested capital appreciation.
In this regard, Rural Funds Group stands out as a strong ASX dividend share worth considering buying today.
Rural Funds Group provides exposure to the agricultural sector, an essential and growing component of the economy. The REIT's business model focuses on long-term leasing arrangements with agricultural tenants, providing stable rental income.
Over the last 12 months, Rural Funds paid a total distribution of 11.6 cents per unit, implying a 5.6% yield from its closing price of $2.09.
Trading at a price-to-book (P/B) ratio of just 0.7x, Rural Funds Group appears undervalued compared to its asset base, offering potential upside. The company estimates its net asset value (NAV) to be $3.07 per unit as of 31 December 2023, including the market value of its water entitlements. This means its adjusted P/B ratio, based on the company's NAV estimate, is at just 0.66x.
Motley Fool contributor Kate Lee does not own shares of Rural Funds Group.
Nick Scali Limited
What it does: Nick Scali is a high-end furniture retailer. As of February, the company had 108 store locations across Australia and New Zealand. The sofa-seller also operates 21 stores in the United Kingdom following its recent acquisition of Fabb Furniture.
By Mitchell Lawler: Retail is a tough industry. You only need to look to the financial struggles of Booktopia for an example of this.
It's incredibly hard to differentiate yourself in this often cutthroat industry. However, I believe Nick Scali is one company that has successfully separated itself from the pack. This is evidenced by the abnormally high return on capital it has generated — 27.4% in the past year.
Moving into a market two-and-a-half times the size of Australia may come with challenges. However, I'm confident Nick Scali will leverage economies of scale to give local UK competitors a run for their money.
Nick Scali currently yields 4.9% of passive income.
Motley Fool contributor Mitchell Lawler does not own shares of Nick Scali Limited.
IPH Ltd
What it does: IPH is an intellectual property solutions company with operations across the world.
By James Mickleboro: In the current uncertain economic environment, I think income investors ought to focus on companies with defensive qualities.
IPH has these qualities and more, thanks to the ever-growing patent market. In addition, the company is no stranger to making acquisitions to bolster its growth in a fragmented market. This ultimately led to IPH reporting a 21% increase in revenue and a 13% lift in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) during the first half of FY 2024.
Analysts at Goldman Sachs have highlighted these defensive earnings as a reason to buy. They recently stated their belief that IPH was "well-placed to deliver consistent and defensive earnings with modest overall organic growth."
The broker expects this ASX share to pay fully franked dividends per share of 34 cents in FY 2024, 37 cents in FY 2025, and then 39 cents in FY 2026. Based on the recent IPH share price of $6.16, this represents yields of 5.5%, 6%, and 6.3%, respectively. Goldman Sachs has a buy rating and $8.70 price target on IPH's shares.
Motley Fool contributor James Mickleboro does not own shares of IPH Ltd.
Vanguard Australian Shares High Yield ETF
What it does: This exchange-traded fund (ETF) holds a select portfolio of blue chip ASX dividend shares, selected on their current yields and future income potential.
By Sebastian Bowen: With many ASX dividend shares surging in value in recent months, I think this ETF from provider Vanguard is a prudent choice for a high-income investment this July and beyond.
VHY holds a portfolio of around 70 mature ASX businesses, automatically providing a bucketload of diversification benefits. These stocks range from many different corners of the market, too, and include everything from Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP) to Woodside Energy Group Ltd (ASX: WDS) and Telstra Group Ltd (ASX: TLS).
Given the kinds of companies this ETF holds, it goes without saying that there is a lot of dividend income potential here.
The Vanguard Australian Shares High Yield ETF also pays quarterly dividend distributions, which will be a welcome change for many investors who are used to the typical biannual ASX schedule.
This ETF's most recent four payments add up to an annual total of $4.24 per unit. That gives VHY units a hefty dividend yield of 5.88%. You could certainly do worse if you're looking for an income heavy-hitter right now.
Motley Fool contributor Sebastian Bowen owns shares of Telstra Group Ltd.
Bendigo and Adelaide Bank Ltd
What it does: Bendigo and Adelaide Bank operates in the personal, small business, and rural banking sectors. The company is one of Australia's leading regional banks and commands a market cap of around $6.6 billion.
By Bernd Struben: I think there's a lot to like about Bendigo and Adelaide Bank.
First, there's its lengthy track record as a reliable passive income payer and the relatively high yield the S&P/ASX 200 Index (ASX: XJO) bank stock is currently trading at.
Over the past 12 months, it has paid out two fully franked dividends, totalling 62 cents a share. At the recent share price of $11.65, that equates to a trailing yield of 5.3%, with potential tax benefits from those franking credits.
And this high trailing dividend yield comes after the Bendigo and Adelaide Bank share price has soared 37% over the full year. That strong share price performance, and the ongoing uptrend, is the second reason I like this stock.
The third reason is its attractive valuation. Despite the 37% share price surge, the bank has a price-to-earnings (P/E) ratio of 13.8 times. That's near the lowest P/E ratio you'll find among any of the ASX 200 bank stocks.
Motley Fool contributor Bernd Struben does not own shares in Bendigo and Adelaide Bank Ltd.
