It can be an interesting insight to know what brokers think of an ASX dividend share. The problem is that a single broker can be wrong or biased.
If you can get a consensus among brokers about which shares are best, then that may give a 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 ASX dividend shares that fit the bill:
Woodside Petroleum Limited (ASX: WPL)
Woodside is Australia’s largest oil and gas producer and it is benefiting significantly from the relatively high commodity prices at the moment.
The good prices are resulting in good profit and cashflow for the company, supporting an attractive grossed-up dividend yield of 7.9%.
However, resource prices can be very fickle, so I wouldn’t place a lot of confidence on the current oil price remaining at the current level for a long time and therefore the dividend is not that safe either.
National Australia Bank Ltd (ASX: NAB)
NAB is having a topsy turvy week. APRA now wants it to hold more capital, but it also looks like the housing market in Sydney and Melbourne is stabilising, which would be a very good thing to ensure bad debts don’t ramp up further for NAB.
The attractive thing about NAB and the other banks for income is that they pay out a large amount of their profit as a dividend, leading to a big yield. NAB has a projected grossed-up dividend yield of 8.7% if it pays another 83 cents per share dividend at the full year report.
But I’m wary about banks because they are likely to be cyclical over time, meaning the dividend may not be as consistent in the future as the past.
New Hope Corporation Limited (ASX: NHC)
New Hope is one of Australia’s biggest and best coal miners due to its low costs to produce the resources.
Its share price has fallen considerably in recent months because of a falling coal price, but that could mean now is a fairly good time to buy shares.
However, not only are commodity prices notoriously cyclical, I’m not sure about the long-term future of coal due to climate change concerns.
New Hope currently has a trailing dividend yield of 6%.
There are positives to each of these dividend ideas, but I think all of them have their potential risks. I’d much rather invest in a business that can deliver consistent growth over cyclical dividends.
That’s why I like the idea of investing in one of these top ASX dividend shares.
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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.