What fully franked ASX dividend shares should I buy?
Fully franked dividend shares are a dime-a-dozen on the ASX (hot tip: that means there are a lot of them), but sorting the wheat from the chaff is anything but easy.
Indeed, an ideal fully franked dividend share is one that:
- Pays a consistent and growing fully franked dividend; and
- Increases in price along the way
Take, for example, the mighty Telstra Corporation Ltd (ASX: TLS)…
As you can see in the chart above, Telstra has consistently paid dividends over the past five years (all fully franked) and its share price is up over 93%.
What's more adding the income (dividends) and capital gains (share price movements) together, Telstra shares have returned a grand total of 145% in five years. That's despite the recent falls in share price.
Wesfarmers Ltd (ASX: WES), the owner of Coles, Bunnings Warehouse, Kmart and more, is another popular choice for investors chasing income. So too are big bank shares, like National Australia Bank Ltd. (ASX: NAB). However, shares of Wesfarmers and NAB have performed not nearly as well as Telstra over the past five years.
What fully franked dividend shares should you buy?
Picking winning dividend shares isn't easy, and – frankly – shouldn't be your only aim as a share market investor.
Picking market-beating investments is hard enough — let alone trying to forecast the willingness of a company to return cash to its investors in the form of a dividend. Remember dividends are not guaranteed — far from it.
In my opinion, the best thing you can do is find growing companies, with strong balance sheets, great economics (wide profit margins, comparable sales growth, etc.) and a reputable management team.
While it's not a fool-proof method for unearthing the best dividend shares to own each and every year, I'd like to think that checklist will serve you better than shooting for the company's with the biggest dividend yields right now.
Of course, you won't need to dive to the depths of the ASX to find great companies. For example, The Motley Fool's expert investing team recently hand-picked their best dividend share idea for 2016.
