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Should income investors buy ANZ and these ASX dividend shares?

ANZ Bank

With an average dividend yield of approximately 3.9%, the Australian share market is one of the most generous in the world.

As a comparison, the S&P 500 in the United States only offers an average dividend yield of 1.97% at present according to Multpl.

This is very fortunate given the low interest rate environment that we’re living in. But with so many dividend shares to choose from, it can be hard to decide which ones to buy.

To narrow things down, I have picked out three top dividend shares that I would buy today:

Australia and New Zealand Banking Group (ASX: ANZ)

With the housing market showing signs of improvement at long last, I think the big four banks would be good options for income investors that don’t already have exposure to them. ANZ continues to be my top pick in the industry due to its current valuation, strong capital position, and generous yield. At present ANZ’s shares offer a trailing fully franked 5.7% dividend yield.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Another option is the owner and operator of Sydney Kingsford-Smith International Airport. Although the tourism boom is showing signs of ending and passenger growth is slowing, I still believe the company is capable of growing its income and dividend at a rate quicker than inflation. In addition to this, its status as a bond proxy should support its share price in the near term if the Reserve Bank continues to cut rates and push bond yields down to lower levels. Sydney Airport’s shares offer a 4.7% dividend yield at present.

Transurban Group (ASX: TCL)

I believe this toll road operator is a great option for income investors due to the quality of the company and its long track record of dividend increases. It has achieved this thanks to its high quality assets, the growing number of vehicles on its roads, strong pricing power, and acquisitions and developments. In FY 2020 its solid growth is expected to continue, leading to management providing distribution guidance of 62 cents per security. This will be a 5.1% increase year on year and equates to a forward 4.3% forward yield.

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Returns As of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited and Transurban Group. 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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