ARB Corporation Limited (ASX: ARB) shares, National Australia Bank Ltd. (ASX: NAB) shares and APA Group (ASX: APA) shares offer big dividends to shareholders.
Dividend shares make an ideal investment
Dividends are often paid six-monthly to shareholders, in the form of a direct deposit, cheque or via the issuance of new shares. While they are not guaranteed like your term deposit may be, dividends can often be consistent and a lot more meaningful than the interest paid on a deposit.
For example, most banks are currently offering around 2.5% interest on annual term deposits. After tax and inflation, that's not much.
However, some ASX shares are paying double that amount. What's more, some of them also pay tax-effective franking credits.
ARB Corporation
ARB Corporation shares pay a 2.3% dividend with full franking credits. If we include the effect of those tax credits, the dividend increases to 3.3%. While that may not seem like much, ARB shares have risen 55% over the past five years and increased their dividends along the way. So, you are not only getting a consistent income stream but the potential to grow your capital.
ARB is Australia's leading manufacturer of bull bars and 4×4 accessories. It is founder-run and internationally diversified.
NAB
National Australia Bank shares have the largest dividend yield — currently, 5.7% fully franked — amongst Australia's biggest banks. NAB is a leader in business banking and also controls a large chunk of the local mortgage market.
Following the divestment of its poorly performing overseas businesses, NAB shares rallied, much to the delight of its long-suffering shareholders.
APA Group
APA Group is a $10 billion company which owns an extensive network of natural gas pipelines, wind and solar farms, as well as associated infrastructure. It does not pay franking credits with its dividends, but it is expected to distribute a dividend equivalent to 4.8% over the next 12 months.
Foolish Takeaway
Dividends from shares are a riskier income stream than term deposits or savings accounts. However, if you have an emergency fund set aside, some cash in term deposits and a long-term investment horizon (three years plus), share dividends could offer the best returns for your money, in my opinion.
If I were to pick one of these shares to buy today, it would be ARB Corporation for its growth and dividends. However, NAB and APA are closest to a 'hold' in my book.
