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3 dividend shares rated as buys by brokers

It can be an interesting insight to know what brokers think of a share. The problem is that a single broker can be wrong or bias. If you can get a consensus among brokers about which shares are best, then that may give an (obvious) clue about what to buy and what to avoid.

Every so often MarketIndex collates the broker recommendations of 450 ASX shares and totals the buys, holds and sells for those shares. The higher or lower the average score the more of a strong buy, buy, hold, sell or strong sell that share is.

The below ideas have dividend yields above 5% and a market capitalisation above $1 billion. However, a high dividend yield can indicate a falling share price or limited growth prospects.

Here are three of the shares that fit the bill:

Viva Energy Reit Ltd (ASX: VVR)

This business owns over 440 service stations and convenience properties, with 76% of them in metro areas and 24% of them being regional properties.

It has a long weighted average lease expiry (WALE) of 13.2 years, which is one of the longest in the industry. It boasts of a 100% occupancy rate and it has 3% per annum fixed rent increases.

It currently boasts a trailing 6.3% yield.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is one of the most successful fund managers in Australia, it has grown its funds under management (FUM) to an impressive $74.5 billion.

There could be several reasons about why Magellan continues to grow FUM at an attractive rate. It can ‘organically’ grow FUM thanks to impressive returns, which would also attract additional funds from investors seeking the best manager. Mandatory superannuation contributions also increases the amount of addressable FUM.

Magellan recently took the decision to change the dividend payout ratio to 90% to 95% of the funds management business, which boosts the yield nicely. Funds management is a very scalable business, it doesn’t require much additional capital.

It currently has a grossed-up dividend yield of 7%.

IOOF Holdings Limited (ASX: IFL)

Financial business IOOF is another one rated as a buy.

The wealth divisions of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and AMP Limited (ASX: AMP) have all come under fire in the Royal Commission, so there is a chance for IOOF to lead the way as the others step back from the sector.

It’s trading at only 13x FY19’s estimated earnings and now has a grossed-up dividend yield of 9.7%.

Foolish takeaway

In the aftermath of the Royal Commission, there is a decent opportunity for IOOF to grow, however it may be worth avoiding until the conclusion of the Royal Commission.

Magellan would be my pick of the three because of its industry-leading performance and plans to potentially expand into other financial sectors like retirement income.

Another top dividend share to consider is this top stock which just grew its dividend by 20% in FY18 reporting season.

The best dividend stock to buy in November

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank 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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