Due to many companies conserving cash in order to strengthen their balance sheets during the coronavirus pandemic, there are fewer shares than normal paying dividends.
Whilst I expect things will return to normal in FY 2021, in the meantime income investors will have to choose their shares wisely if they want dividends this year.
Three top shares which I expect to continue to pay dividends through the crisis are listed below. Here’s why I would buy them:
Commonwealth Bank of Australia (ASX: CBA)
Whilst it is inevitable that Commonwealth Bank and the rest of the big four banks will have to cut their dividends in the coming months, I wouldn’t let this put you off investing. This is because a sharp decline in the banking giant’s shares over the last couple of months means that they will still provide a very generous yield even after factoring in a probable cut. I estimate that Commonwealth Bank will pay a dividend of $3.80 per share in FY 2021, down from $4.31 per share. Based on this estimate, the bank’s shares offer a forward fully franked 6.1% dividend yield.
Dicker Data Ltd (ASX: DDR)
Dicker Data is a wholesale distributor of computer hardware and software products throughout Australia. The company’s vendors include many of the biggest names in the industry such as Hewlett-Packard, Cisco, and Microsoft. With these, it services over 5,000 resellers who in turn service multiple clients ranging from SMEs to large corporations. It has been a very strong performer over the last 12 months and appears well-positioned to continue this form despite the coronavirus pandemic. After adjusting for its special dividend, I estimate that its shares offer a fully franked 4.6% dividend yield.
Wesfarmers Ltd (ASX: WES)
I think Wesfarmers would be a top dividend share to own. This is due to the quality and diversity of its portfolio and its positive long term growth prospects. Another positive is that its Bunnings business is thriving during the coronavirus pandemic and looks set to underpin a solid second half result from the conglomerate. In addition to this, following the selldown of its stake in Coles Group Ltd (ASX: COL), the company is cashed up and could bolster its portfolio with earnings accretive deals. Its shares currently offer an estimated forward fully franked 4% dividend yield.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of 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.