With an average dividend yield of approximately 4%, there certainly is a lot of choice for income investors on the Australian share market.
With that in mind, are these three dividend shares in the buy zone today?
Monash IVF Group Ltd (ASX: MVF)
This fertility company’s shares have sunk like a stone over the last 18 months amid competitive pressures from a low-cost bulk billing operator and the loss of one of its key doctors. Because of this decline Monash IVF’s shares now provide a generous trailing fully franked 7.2% dividend. Whilst this is a very tempting yield, I have a feeling that the company could be forced into cutting its dividend significantly in the future due to the prospect of another decline in profits next year when the aforementioned doctor’s non-compete clause end. This could ultimately make the company a bit of a value trap.
National Australia Bank Ltd (ASX: NAB)
Due to recent market volatility and the Royal Commission, the shares of this banking giant have fallen notably lower and are trading within sight of their 52-week low. This means that National Australia Bank’s shares now offer investors a trailing 6.95% fully franked dividend. Considering the bank posted a 3% increase in quarterly cash earnings to $1,650 million last month, I think this dividend could be increased further when it reports its interim results. Because of this and its cheap price, I would class the bank as a buy.
Vita Group Limited (ASX: VTG)
Like Monash IVF, I have concerns that Vita Group could also be a value trap right now. While its shares look dirt cheap and provide a trailing fully franked 10% dividend, I don’t believe the company will be able to maintain this payout for much longer. Not when Telstra Corporation Ltd (ASX: TLS) is cutting down the number of retail stores Vita operates on its behalf and reducing its remuneration.
Instead of Vita Group, I would be buying this growing dividend share.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended Monash IVF Group Ltd. 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 Scott Phillips.