It can be an interesting insight to know what brokers think of an ASX dividend share. The problem is that a single broker can be wrong or biased.
If you can get a consensus among brokers about which shares are best, then that may give a clue about what to buy and what to avoid.
Every so often MarketIndex collates the broker recommendations of 150 ASX shares and totals the buys, holds and sells for those shares. The higher or lower the average score the more of a strong buy, buy, hold, sell or strong sell that share is.
The below ideas have dividend yields above 5% and a market capitalisation above $1 billion. However, a high dividend yield can indicate a falling share price or limited growth prospects.
Here are three of the ASX dividend shares that fit the bill:
Super Retail Group Ltd (ASX: SUL)
Super Retail has a grossed-up dividend yield of 7.1%.
This is a company that runs several retail businesses including Macpac, BCF, Rebel and Supercheap Auto.
It has managed to keep growing its dividend despite the tough operating environment that many retailers find themselves in at the moment.
In the first 16 weeks of FY20 the company delivered total sales growth of 4.2% and like for like sales growth of 3.2%, although this has come at the expense of profit margin. Sales growth can be important to help maintain margins.
New Hope Corporation Limited (ASX: NHC)
New Hope has a grossed-up dividend yield of 12.2%.
This is predominately a coal business, but it’s suffering as the coal price drops. New Hope’s share price has fallen 52% over the past nine months, which has boosted the trailing dividend yield.
New Hope has increased its dividend each year for the past few years, however unless the coal price goes up before the end of FY20 I fear a dividend cut may be on the cards.
Woodside Petroleum Limited (ASX: WPL)
Woodside has a grossed-up dividend yield of 7.6%.
It’s a very large oil and gas business that generates very pleasing cashflow for investors who are looking for income.
Resource prices are notoriously volatile year to year, so we should expect the dividend to go up and down too. However, when times are good (or at least reasonable), Woodside seems to want to pay investors a solid dividend.
If you’re relying on dividends to fund your lifestyle I don’t think it would be wise to go for resource businesses. So because of that, I think Super Retail is the only one I could consider investing in out of the ones in this article. And retail isn’t the most defensive industry. I wouldn’t want to add Super Retail to my portfolio either.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019