3 big dividend shares I'd buy with $50,000 today

These 3 businesses all offer yields above 5.4% now.

| More on:
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 looks like 2019 could be a tough year for Australian investors who hug the index via significant exposure to big bank shares such as Westpac Banking Corp (ASX: WBC) or National Australia Bank (ASX: NAB) to get their dividend returns.

Falling house prices, higher wholesale funding costs, and rising operational costs could translate to big bank dividend cuts – so dividend investors should look elsewhere for 2019.

Below are three businesses I would happily invest $50,000 in today in order to get a high yield and hopefully some capital growth.

Dicker Data Ltd (ASX: DDR) is an IT hardware distribution business I've owned for several years that continues to offer a big yield and trade on a reasonable valuation.

On an annualised basis it'll earn nearly 20 cents per share placing it on 14.3x earnings with a consistent track record of profit growth adding to the attractiveness of the valuation. Mind you it pays out pretty much all its profits in dividends paying 9.2 cents per share in dividends on earnings of 9.84 cents per share for the six-month period ending June 30, 2018.

When it comes to dividends you should look forward and if we reasonably conservatively assume Dicker Data can deliver 18.5 cents per share in dividends over the next 12 months it offers a yield of 6.5% plus full franking credits based on today's $2.85 share price.

Best of all is that from CEO to COO management are heavy shareholders and investors presumably relying on the dividend growth to boost their own wealth.

Recently, the COO has been buying more shares to add to an already significant holding, which in my view is quite a bullish signal for an IT hardware distribution business.

Magellan Financial Group Ltd (ASX: MFG) is in my view the only investment grade fund manager on the ASX, unless you include Macquarie Group Ltd (ASX: MQG).

Magellan recently hiked its dividend policy to payout 90%-95% of net profit in dividends, and this makes sense seeing it's a capital light business that requires minimal reinvestment back into the business as an international equities fund manager.

For the six months ending June 30 2018 it paid 90 cents per share in dividends made up of a 75.1 cents in ordinary dividends and 14.9 cents as a performance fee dividend.

Even if we conservatively remove the performance fee dividend and an 8.4 cents top up amount added to the most recent dividend to double the remaining ordinary dividend (66.7 cents) to 133.4 cents the yield is 5.3% plus full franking credits at today's price of $25.10.

Again, I would not be surprised if the yield available to investors is in fact higher given Magellan has once again grown FUM strongly over the six months to December 31, 2018.

Sydney Airport (ASX: SYD) is a business I don't own, but one I'd be interested in buying given its big dividend, monopoly like status, and growth prospects backed up by the rise of the Chinese and wider Asian middle class.

The airport will pay out 37.5 cents per share in dividends over 2018 which puts it on a trialing yield of 5.4% plus full franking credits based on today's share price of $6.90. In early November the stock traded under $6.50 offering a yield of 5.8% which is what I would require to compensate me for the risks of owning an equity given rising benchmark debt rates globally.

Motley Fool contributor Tom Richardson owns shares of Dicker Data Limited and Magellan Financial Group. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Sydney Airport Holdings 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 Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »