5 ASX high dividend stocks for your watchlist in 2024
Sep 12, 2024
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Owen Rask, an expert in Australian shares, joins to discuss the ins and outs of dividend investing. He emphasizes the unique advantages of the ASX, including franking credits and consistent income sources. Owen shares tips for spotting high-quality dividend stocks, spotlighting Cochlear and ResMed for their growth potential. The conversation also includes insights on real estate investment trusts (REITs) and the benefits of dividend reinvestment plans, all tailored for building a resilient and profitable investment portfolio.
Dividends serve as a reliable income source, providing stability in fluctuating markets while companies vary in their dividend policies.
Diversifying with low-cost ETFs can mitigate risks and enhance long-term investment success, offering numerous options for core asset allocation.
Deep dives
The Importance of Diversification in Investing
Staying diversified is crucial for long-term investment success, according to the discussion. Emphasizing low-cost, broad-based ETFs as core components of a diversified portfolio helps mitigate risks associated with market volatility. The availability of various ETFs, such as those from Betashares, provides investors with multiple options for core investments, mirroring the building blocks necessary for wealth accumulation. By maintaining a diversified portfolio, investors can capitalize on growth opportunities while reducing the impact of underperforming assets.
Understanding Dividend Investing
Dividend investing serves as a source of income and can offer stability, particularly in fluctuating markets. It is emphasized that dividends arise when companies distribute some of their profits back to shareholders, ensuring investors receive a return even when stock prices dip. Companies vary in their dividend policies, with established firms often maintaining consistent dividends, while younger, growing companies may reinvest profits instead. Examples like Telstra showcase how dividends work, highlighting the difference between dividend income and capital growth.
Attributes of Quality Dividend Stocks
Investors are encouraged to evaluate stocks based on key attributes beyond just the dividend yield. Factors like a company's competitive advantage, growth potential, sound management, and sector positioning are vital when identifying strong dividend-paying stocks. For instance, a company like McDonald's illustrates how leveraging competitive advantages allows for sustained growth and dividend payments. Evaluating these aspects helps in avoiding yield traps where investors might misjudge the long-term viability of a stock based solely on its current yield.
The Role of ETFs in Dividend Investing
Utilizing ETFs is a practical approach for investors looking to diversify their dividend-producing assets without purchasing individual stocks. The Vanguard Australian Shares High Yield ETF, for example, aggregates a selection of companies known for paying dividends, providing a stable source of income while mitigating risk through diversification. Reinvesting dividends through a Dividend Reinvestment Plan (DRP) allows investors to capitalize on compound growth over time. Such investment strategies reduce the burden of stock selection and management, which can be particularly beneficial for novice investors.
Getting income from ASX shares or ETFs is pretty much second to none. The consistency of income, the laws that incentivise boards to pay income to ASX shareholders, and the franking credits make the Australian share market unlike any other.
Owen Rask discusses why companies pay dividends, shares his tips on finding high-quality dividend shares, and talks about five he's got on his watchlist at the moment.
DISCLAIMER: This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs before acting on it. If you’re confused about what that means or what your needs are, you should always consult a licensed and trusted financial planner. Unfortunately, we cannot guarantee the accuracy of the information in this podcast, including any financial, taxation, and/or legal information. Remember, past performance is not a reliable indicator of future performance. The Rask Group is NOT a qualified tax accountant, financial (tax) adviser, or financial adviser.