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The 3 best dividend shares to own in 2016

Credit: GotCredit

Australian investors love their dividends – and for good reason.

Here in the land Down Under, public corporations – that is, those listed on the securities exchange – tend to return a large portion of their earnings to shareholders at every six-month interval. Many of those who generate the majority of their earnings locally also distribute ‘franking credits’ which can act as a huge tax advantage for the recipient.

What’s more, in August last year, Dr Shane Oliver Chief Economist for AMP Capital noted that: “Of the 11.8% pa total returns from Australian shares since 1900, just over half has been from dividends.”

All things considered, there’s a pretty convincing case to make dividend-paying shares a decent portion of your portfolio….

With the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) still hovering well below its high levels from earlier this year, now could be a great time to start looking for new shares for what could be a bumper 2016 for our share market. Here are three ideas you could consider today:

Wesfarmers Ltd (ASX: WES) could make for a reasonable long-term addition to your share portfolio at today’s price of around $40 a share, down from almost $47 earlier in the year. Wesfarmers is the parent company behind a number of leading businesses such as Coles, Bunnings Warehouse, Kmart and Officeworks. It pays a reliable dividend which should continue to grow over the coming years. Currently, the shares offer a forecast 5% fully franked dividend yield.

Westfield Corp Ltd (ASX: WFD) is another big-name ASX share you could consider adding to your portfolio for 2016. The company owns and operates Westfield-branded shopping centres in the United States and the United Kingdom, with plenty of opportunities for further growth. As the company generates all of its earnings overseas, it doesn’t frank its dividends but recently confirmed it is on track to distribute US25.1 cents per security to shareholders, or AU34.7 cents based on today’s exchange rate. That suggests a 3.6% dividend yield.

Retail Food Group Ltd (ASX: RFG) shares seem to have fallen out of favour with investors this year, but the underlying business itself remains well and truly intact. The company, which owns brands such as Gloria Jean’s and Donut King, has consistently grown earnings and dividends in the nine years since it listed on the ASX, while the shares are currently offering a 5.5% fully franked dividend yield, grossed to 7.8%.

Get the BEST dividend share for 2016

Of course, those three companies mentioned above aren't the only dividend shares you could consider adding to your portfolio in time for the New Year. Given the sell-off of Australian shares over the last eight months or so, there are many companies with attractive dividend yields that I believe are currently trading at very reasonable prices for long-term investors -- some of which also have the potential to grow considerably over the coming years.

To give you a head-start in your investing journey in 2016, The Motley Fool's top analysts have been busy at work selecting what they think is the BEST dividend share to own in the New Year. This "dirt cheap" company is growing like gangbusters, and trading on a fully franked dividend yield just shy of 7% (10% gross).

With interest rates set to stay at these low levels for years to come, for income-hungry investors, including SMSFs, this ASX company could be the "Holy Grail" of dividend plays for 2016. Click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required.

Motley Fool contributor Ryan Newman owns shares of Retail Food Group Limited. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia owns shares of Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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