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3 top dividend shares with yields over 4%

Credit: GotCredit

Dividends play a big role in contributing to total shareholder returns and with the 10-year Australian government bond yield at 2.62%, dividends are important for investors seeking income.

With that in mind, here are three top dividend paying companies with yields over 4%:

WAM Capital Limited (ASX: WAM)

WAM Capital is the largest ASX Listed Investment Company (LIC) run by well-known fund manager Geoff Wilson. It has a track record of outperforming the ASX all ordinaries index although that comes at a price with an expensive fee structure.

It’s also highly diversified with positions in over 100 companies including Flight Centre Travel Group Ltd (ASX: FLT), Corporate Travel Management Ltd (ASX: CTD) and Seven Group Holdings Ltd Fully Paid Ord. Shrs (ASX: SVW).

WAM Capital pays a fully franked dividend yield of 6.6%.

Macquarie Group Ltd (ASX: MQG)

Macquarie is a truly diversified financial services business with its asset management business providing recurring annuity income while investments in renewable energy could provide growth and big returns in the future.

The “millionaire’s factory” has a 10-year dividend growth rate of 12.5%, a payout ratio of 63% and while its dividends are not fully franked, its foreign income from countries such as the US provide it with a currency hedge against drops in the Australian dollar.

Macquarie pays a 45% franked dividend yield of 4.3%.

Wesfarmers Ltd (ASX: WES)

With brands such as Bunnings, ColesOfficeworks, Kmart and Target, Wesfarmers has a wide reach. Plans to spin off low margin retailer Coles also demonstrates how good the company is at M&A.

Having bought Coles in pre-Aldi days when competition in the retail sector was low, I think it’s a good decision to exit the business and that will free up management time and raise funds for investment in more lucrative areas.

Wesfarmers pays a fully franked dividend yield of 4.4%.

Foolish takeaway

I like the three shares above for their high yields but more importantly, they exhibit one or more of the following traits that make those yields sustainable:

  • Diversified sources of income
  • Credible and highly capable management teams with a track record of success
  • Reasonable payout ratios with options for growth

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can find Kevin on Twitter @KevinGandiya.

The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, and Wesfarmers 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.

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