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%.