3 dividend shares with big yields over 6.25%

These 3 dividend shares all have huge yields.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's getting increasingly difficult to find reliable dividend payers that pay a decent yield but also offer relative safety.

One major contributor to this conundrum is that many of the major dividend payers have reached maturity and are now slow-growth businesses. They're now large targets for smaller competitors and are at risk of having their profit margins reduced.

The best way for Australians to combat this may be to invest in shares that invest in other shares and pay out a majority of their gains out as dividends. Those investment shares are called listed investment companies (LICs). Here are three good options:

WAM Leaders Ltd (ASX: WLE)

WAM Leaders is a LIC run by the high-performing Wilson Asset Management team. WAM Leaders is the LIC that focuses on the large end of the Australian share market.

Over the past year to the end of April, the WAM Leaders portfolio has grown by 14% before fees, compared to the S&P/ASX 200 Accumulation Index which had grown by 5.5%. This is an impressive outperformance.

The WAM Leaders portfolio has outperformed its benchmark every month this financial year. If it pays the same 2.5 cents per share dividend later this year, it's trading on a grossed-up yield of 6.3%.

NAOS Absolute Opportunities Co Ltd (ASX: NAC)

This company is run by Naos Asset Management. This particular LIC looks at industrial companies with market capitalisations between $400 million and $1 billion.

I like the Naos way of doing things because they run very concentrated portfolios. This can lead to outperformance over the long-term if the investment team selects shares correctly. Over the past three years the portfolio has returned an average of 16.26% per annum before fees.

If the LIC repeats its half-year dividend amount of 2.75 cents per share again, it's currently trading on a grossed-up dividend yield of 7.9%.

Clime Capital Limited (ASX: CAM)

Clime is a LIC that aims to give shareholders exposure to a wide variety of shares in the large cap, medium cap, small cap ASX worlds and the international share market.

Returns aren't guaranteed of course, but I like the shares it's picking as major holdings including Ramsay Health Care Limited (ASX: RHC), Credit Corp Group Limited (ASX: CCP), Collins Foods Ltd (ASX: CKF) and Alphabet Inc (Google).

It is steadily increasing its dividend and currently has a grossed-up yield of 8.4%.

Foolish takeaway

I like all three LICs and I'd much rather own one of them than most of the top ASX20 businesses. At the current prices I'd probably go for the Naos one because it's trading at a bigger discount to the NTA, but WAM Leaders would also make a good long-term choice for income.

Motley Fool contributor Tristan Harrison owns shares of Ramsay Health Care Limited. The Motley Fool Australia has recommended Ramsay Health Care 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 Scott Phillips.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »