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Top broker lists 15 ASX shares with safer dividends than Westpac

This bank reporting season showed the ugly underside to ASX income investors depending on dividends from what they thought was one of the safest sectors on the market.

But the COVID-19 pandemic showed the limits of the big banks’ unquestionably strong balance sheets with Westpac Banking Corp (ASX: WBC) joining Australia and New Zealand Banking GrpLtd (ASX: ANZ) in suspending their interim dividends.

Those looking for more dependable dividend payers to get through the coronavirus-triggered recession will need to look elsewhere for salvation!

This is where Morgans steps in as the broker points to where dividend nirvana may lie for those who prize a regular and dependable payment from their ASX share portfolio.

Morgans picked 15 shares that it believes will provide income safety for a prolonged period of low interest rates.

  • JB Hi-Fi Limited (ASX: JBH): While there are risks around all discretionary retailers, Morgans believes JBH is better placed than most with its strong balance sheet and cash flow generation. It’s exposure to work-at-home equipment also offers some protection from the downturn.
  • Coles Group Ltd (ASX: COL): It’s a supermarket that’s benefiting from panic buying and the lockdown. Do I need to say more?
  • Woolworths Group Ltd (ASX: WOW): It would be funning not to include Coles’ archrival to the COVID-19 thematic although its hotels business is under strain. Nonetheless, Woolies balance sheet should have enough grunt to outlast the downturn.
  • AMCOR PLC/IDR UNRESTR (ASX: AMC): The packaging group runs a defensive business and its history of maintaining or increasing dividends gives Morgans confidence in its dividend prowess. I couldn’t agree more!
  • Orora Ltd (ASX: ORA): Morgans thinks this fellow packaging company is also worth looking at, particularly as it will be cashed up from the ~$1.6 billion sale of its fibre business.
  • Aurizon Holdings Ltd (ASX: AZJ): The broker points out that the rail operator’s coal haulage business (~43% of earnings) is partly protected by capacity charges covering 50-60% of its revenues. Aurizon also benefits from a strong balance sheet.
  • BHP Group Ltd (ASX: BHP): The mining giant is cashed up and holds little debt. The relatively resilient outlook for iron ore also means it should be able to sustain its dividend.
  • Rio Tinto Limited (ASX: RIO): Australia’s largest iron ore producer is one of the most resilient global resource franchises, with total net debt of just US$3bn for gearing of 7%, according to Morgans.
  • APN Convenience Retail REIT (ASX: AQR): The property trust owns a portfolio of 80 service stations. Morgan said it remains a preferred REIT given the underlying portfolio fundamentals and balance sheet.
  • Viva Energy Reit Ltd (ASX: VVR): Similar to AQR. VVR’s portfolio is valued at $2.65bn (comprising 469 service stations/73% by value in metro areas). Gearing at December 30.4%.
  • Centuria Industrial Reit (ASX: CIP): The trust has a solid balance sheet post its capital raise. Morgans noted that it remains one of the few listed REITs offering investors pure exposure to Australian industrial property which is leveraged to the growing e-commerce/logistics thematic.
  • APA Group (ASX: APA): The gas pipeline company is another defensive business. Management left its FY20 dividend guidance at 50 cents a share and Morgans thinks this will increase to 51.25 cents a pop next year.
  • Ausnet Services Ltd (ASX: AST): Over 90% of earnings are generated from its regulated energy networks with regulatory cycles running for five years.
  • Spark Infrastructure Group (ASX: SKI): About three-quarters of revenues are subject to a regulated revenue cap, which insulates it from volume risk. It also has strong asset company balance sheets.
  • AGL Energy Limited (ASX: AGL): Customers defaulting on their power bills due to economic hardship is a key risk, but group’s business should still be defensive enough to sustain its dividend. Morgans also said AGL is insulated from lower spot electricity prices by high vertical integration.

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Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, BHP Billiton Limited, Rio Tinto Ltd., and Westpac Banking.

The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia owns shares of APA Group, COLESGROUP DEF SET, and Woolworths 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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