Love dividends? You’re in the right place!
Below, you’ll discover my sample dividend portfolio including 5 solid ASX companies yielding an average 5.6%… and all fully-franked!
With term deposit rates well below 5% and falling, the dividend yields of some of the ASX’s best companies look more attractive than ever.
I know I’ve made no secret of my love for Telstra‘s (ASX: TLS) famous 28-cent fully-franked annual payout. You can access a comprehensive Motley Fool free report titled “Is Telstra A Buy?” by clicking here now.
Today, I’ve assembled a sample portfolio of 5 companies, each of which pay a healthy dividend.
Spoiler alert: unsurprisingly, Telstra has made the list. Yet Telstra’s dividend yield isn’t the highest of all.
Consider GUD Holdings (ASX: GUD). Despite its lacklustre first half results, there’s much to like about GUD as an investment idea.
For starters, this manufacturer of toasters and milk shake makers, among other household items, is trading for less than six times earnings. It’s also offering a fully franked dividend yield of 8.5%. That’s a grossed-up yield, including franking credits, of over 12%.
Even if you consider GUD’s business a little ‘old school’, I think you’ll agree that the cheap price and fat yield offer significant downside protection!
Three simple rules for an instant dividend portfolio
Let me just briefly explain the rules by which I’ve selected GUD, Telstra, and the other three companies in this high-yielding instant portfolio. To keep out more speculative plays and ensure this portfolio remains on the conservative side…
— I’ve kept my picks to companies in the ASX 200.
— I’ve limited myself to one company per sector.
— And I’ve only chosen companies with excellent dividend histories.
So, not a speculative small-cap miner in sight, just some of the ASX’s most solid companies. Each offers the potential for income from dividends.
In total, based on recent share prices, this portfolio offers a potential yield of 5.6%! You’ll also find that many of these companies offer the chance for capital gains as well.
Now let’s take a look at the sample portfolio I’ve assembled for you. Cast your eye over my list…
A simple 5-stock dividend portfolio
Here they are, in order from the highest yield — GUD’s fully franked 8.5% — to the lowest yield, Flight Centre‘s (ASX: FLT) still healthy, fully franked 3.4%, as of yesterday:
1. GUD Holdings (ASX: GUD) — 8.5%
2. Telstra (ASX: TLS) — 6.2%
3. David Jones (ASX: DJS) — 5.9%
4. Platinum Asset Management (ASX: PTM) — 4.0%
5. Flight Centre (ASX: FLT) — 3.4%
Source: S&P Capital IQ
You can see that I’ve gone with a whitegoods company, a telco, a department store chain, a fund manager and a travel agent, ensuring a good measure of diversity.
Most of these companies are, of course, household names. No doubt you’re already familiar with Telstra, Flight Centre and David Jones. You may even already own some of these shares.
In which case, you’ll know that David Jones has paid a fully franked dividend since 1999… And Platinum has paid a fully franked dividend for the last five years.
To say that some of this portfolio is familiar isn’t to say that the portfolio is perfect, or without risk. You’ll want to do your own research. What I’ve suggested here is a starting point for income-hungry investors.
And with an overall yield of 5.6% (and that’s before you gross it up to include franking benefits!), you’d enjoy regular income well in excess of what you’d receive from a term deposit. You’re also positioned to potentially enjoy capital gains from share price growth.
A regular income that beats cash — and with the potential to grow…
There are no “sure things” in investing. Even the best companies can disappoint shareholders sometimes.
Also, please remember that I’ve calculated this yield based on the companies’ trailing payments. While these companies all have strong histories of dividend payments, the yield is not guaranteed.
Yet from my initial research, I’m confident that these 5 companies combined stand an excellent chance of delivering regular income that beats cash in the bank by a significant margin.
But while this is a simple 5-step ‘dividend portfolio’, I think you can do better.
Much better, in fact.
Dividends are a very important part of your investing return, but far from the whole story.
Companies that can grow profits well into the future stand a good chance of not only paying dividends, but of seeing those dividends increase over time. That’s the real magic of dividend-paying shares.
And growing profits are also likely to mean growing share prices.
Foolish investing — business-focussed, long-term investing — is the best way we know to build long-term wealth. In a world of short-term, high-frequency trading, we think the market-beating prize will likely go to the investor who acts more like the tortoise than the hare.
100 straight years of dividends
When it comes to market-beating returns, few ASX investors can match the track record of my colleague Scott Phillips, investment advisor at Motley Fool Share Advisor. I was particularly excited to see Scott’s latest pick for our ‘best of the best’ investment service… a company that has paid a dividend for over a century.
Yet, in spite of this company’s sterling reputation and nearly unmatched dividend-payment history, you wouldn’t classify the shares as widely held among retail investors. In fact, many of Scott Phillips’ picks could be classified as ‘under the radar’… which is one reason the average Motley Fool Share Advisor ASX pick is outperforming the All Ords by some 25 percentage points!
Should you buy Telstra today?
With its share price skyrocketing over the past year, some investors are worrying whether Telstra is past its prime A new Motley Fool free report gives you the low-down. Click here now to access this brand-new FREE report — Is Telstra a buy today? — while it lasts.
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). Motley Fool General Manager Bruce Jackson owns shares in Telstra.