Investors have enjoyed massive capital gains throughout the past couple of years, as the ASX continues to follow its stellar run. But it's surprising to see that even in such a strong market, there are still plenty of opportunities for investors to get their hands on high dividend yields.
Dividends are crucial to an investor's portfolio return and it's amazing to see how influential compounded returns actually are to your portfolio. Our market has provided investors an extraordinary 12% pa return over the past 114 years according to AMP Limited (ASX: AMP), when dividends are reinvested of course. This means that at these rates, investors can double their portfolio returns in about 8 years!
Here are my top two dividend-paying stocks that I think are ready to be bought right now. Remember, it's not only the dividend that matters, the price you pay for the stock is equally as important.
1. DEXUS Property
Commercial property developer, owner and manager, DEXUS Property Group (ASX: DXS) offers an extraordinary 5.3% dividend yield. Although dividends are not fully franked, Dexus provides the additional benefit of exceptional long-term growth prospects at a reasonable price.
Given that tenant relocations into the CBD are reviving the beaten-down office markets, Dexus is set for a solid recovery of earnings in the near future. This improved demand environment also has the potential for Dexus to improve its payout ratio to the upper half of its guidance in the next couple of years.
Even in the wake of softer office markets, Dexus has performed better than most of its competitors in Australia. This shows how resilient a quality company like Dexus can be during tough times.
While trading on a cheap price-to-earnings ratio of 14.67 and offering enticing future prospects that can boost earnings, Dexus looks a buy. If you're considering a long-term dividend stock, Dexus is the right company for you.
2. Automotive Holdings
Australia's largest diversified automotive retailer and logistics group, Automotive Holdings Group Ltd (ASX: AHE) offers an impressive 5.4% fully franked dividend yield, slightly better than Dexus. Automotive Holdings is packed with plenty of earnings drivers that are set to continue in the future.
The strong performance level by automotive industries has led to new vehicle sales hitting record high levels, allowing Automotive Group to boost its vehicle sales. Furthermore, historically lower interest rates mean that customers can obtain cheaper vehicle finance, which should further raise demand for automotive products.
Automotive Holdings' recent string of acquisitions has also set it up for a more dominant position in the market. Acquiring companies such as Greenfield Development and Daimler Trucks gives Automotive Holdings the potential to sustainably grow earnings for the decades to come and provide some serious returns as it steals away more and more market share from its competitors.
Trading on a cheap price-to-earnings ratio of 12.99, Automotive Holdings looks set to help your portfolio compound its way up much faster.
