FEAR & GREED | Business News Dividend investing: How to pick quality income stocks
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Jan 16, 2026 Lachlan Halloway, an equity market strategist at Morningstar, dives deep into the world of dividend investing. He discusses why franking credits make dividends attractive for Australian investors and examines the current ASX yields in comparison to historical data. Lachlan emphasizes the importance of sustainable dividends over simply chasing high yields from last year. He shares criteria for picking quality stocks, highlighting companies like BHP and AGL, while advocating for stability in income over aggressive growth.
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Market Yields Are Below Historical Levels
- ASX trailing yields are lower than their long-run average, making index income harder to find today.
- Morningstar's pick list targets higher-yield stocks with an average ~6% yield versus the ~3–4% market range.
Use Forward-Looking Dividend Checks
- Do assess forward-looking analyst dividend forecasts instead of just last year's yield.
- Also check moats, balance sheet strength, and low uncertainty to pick sustainable dividend payers.
Diversify Your Income Portfolio
- Diversify across sectors to avoid concentrated risks when building an income portfolio.
- Avoid big single-sector bets and spread holdings for more reliable dividend income.