The Motley Fool

Top ASX Dividend Stock Picks for May 2020

Along with our Top ASX Stock Picks for May, we also asked our Foolish writers to pick their favourite ASX dividend stocks to buy this month.

Here is what the team have come up with…

Sebastian Bowen: Macquarie Group Ltd (ASX: MQG)

My inaugural dividend pick is Macquarie Group. Even though this financial giant announced a dividend cut last week, it’s faring a whole lot better than its ‘big 4’ compatriots in 2020 so far. Even after last week’s trim, Macquarie is offering a decent yield of around 4% on recent prices, which also comes partially franked. 

I think Macquarie’s reduced exposure to retail banking (mortgages and loans) and increased exposure to investment banking, infrastructure and asset management has set it up for future prosperity at a time when other financial shares are struggling. Thus, I think it’s a top pick for dividends in 2020.

Motley Fool contributor Sebastian Bowen does not own shares of Macquarie Group Ltd.

Phil Harpur: Telstra Corporation Ltd (ASX: TLS)

Our leading telecommunications provider has been less impacted than many ASX shares throughout the coronavirus crisis due to the essential role that its broadband and mobile services are providing to both businesses and consumers.

Telstra’s internet and mobile services have enabled people to remain in touch with family and friends, and the demand for high bandwidth internet services such as online streaming has increased sharply. Due to this strong demand, the telco provider also appears to be well placed to pay out its scheduled dividend this year. Telstra also looks to be well on track in its strategy to evolve into a leaner, more efficient telco provider by 2022. 

Motley Fool contributor Phil Harpur owns shares of Telstra Corporation Ltd.

Nikhil Gangaram: Amcor PLC (ASX: AMC)

In my opinion, Amcor is an excellent dividend stock with the company boasting a 5.11% yield (at the time of writing) and having exposure to defensive revenue streams. Amcor currently makes the majority of its revenue from the sale of packaging for defensive consumer products such as food, beverages, pharmaceutical products and medical equipment.

Amcor has also maintained a strong balance sheet during the COVID-19 pandemic and is in the process of realising cost synergies from its $9 billion buyout of US group Bemis.

Motley Fool contributor Nikhil Gangaram does not own shares of Amcor PLC.  

Brendon Lau: Fortescue Metals Group Limited (ASX: FMG)

The iron ore miner’s latest quarterly production update reinforces my view that the stock is a sustainable high yielder. The upgrade to full-year shipments and a positive demand outlook for its ore means it is well placed to keep paying a fat dividend, and may even undertake a capital return later this year.

Motley Fool contributor Brendon Lau owns shares of Fortescue Metals Group Limited.

Michael Tonon: Tassal Group Limited (ASX: TGR)

Tassal Group is Australia’s leading seafood producer and its largest producer of Atlantic salmon. It has a focus on quality and sustainability while producing a healthy, sustainable protein which is experiencing increasing demand both domestically and internationally.

I was pleased with Tassal’s recent announcement indicating that early trend changes due to COVID-19 look to be impacting its domestic market favourably. For this reason, and its expected stronger second half, I have confidence that it can continue to pay, or maybe even increase, its current dividend. This is something which should not be taken for granted at these times.

At the time of writing, Tassal currently provides investors with a net dividend yield of 4.8% which is 5.3% grossed up.

Motley Fool contributor Michael Tonon owns shares of Tassal Group Limited.

Daryl Mather: Yancoal Australia Ltd (ASX: YAL)

Yancoal is not only a great dividend stock, but it is also one of the great value opportunities on the ASX today. With a very stable dividend yield of 14.4% at the time of writing, companies like this form the backbone of any income replacement strategy.

Yancoal is home to the ex-Rio Tinto Limited (ASX: RIO) coal assets as well as the world-class Moolarben coal mine. At present, the company has a market capitalisation at least a third lower than its book value. It is well managed and well-positioned for any growth opportunity regardless of current low coal prices. 

Motley Fool contributor Daryl Mather does not own shares of Yancoal Australia Ltd.

Matthew Donald: AGL Energy Limited (ASX: AGL)

AGL recently presented at the Macquarie Australia Conference 2020 and stated it has approximately $1 billion in cash and undrawn facilities.

On 31 March 2020, AGL had a gearing ratio of 26.5% and no bond debt to refinance until FY22. In addition, customer accounts grew and its churn numbers are decreasing.

Given its defensive characteristics and strong financial position, I believe AGL can reward investors with a dividend in the current climate. Based on trailing dividends and the current share price, AGL’s yield is 6.74%. Considerably more than term deposits!

Motley Fool contributor Matthew Donald does not own shares of AGL Energy Limited.

Ken Hall: Fortescue Metals Group Limited (ASX: FMG)

The Fortescue Metals share price could be a great dividend buy right now. Fortescue shares are yielding 8.73% at the time of writing which makes it a top ASX dividend share in my books. Dividend yields can be a bit misleading at the moment, but I still think the fundamentals are solid for the Aussie iron ore miner.

Times are tough but there are signs that China’s economy is picking up and the Aussie government could invest in infrastructure. That could mean more demand for iron ore which is good news for Fortescue’s earnings (and dividends!) in 2020.

Motley Fool contributor Ken Hall does not own shares of Fortescue Metals Group Limited.

Tristan Harrison: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

If you’re after reliable and growing dividends, Soul Patts may be the best pick on the ASX. It has grown its dividend every year since 2000 and it has paid a dividend every year since 1903.

The investment house has a diversified portfolio from different industries including telecommunications, building products, resources, financial services and soon data centres (according to the AFR).

Its dividend is funded by the annual investment income it receives, less expenses. In FY19, around 20% was retained for further growth. The grossed-up dividend yield is around 5% after the coronavirus share market decline of over 20%.

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Co. Ltd.

James Mickleboro: Sydney Airport Holdings Pty Ltd (ASX: SYD)

If you’re not in need of an immediate source of income, then it could pay to be patient with Sydney Airport. Australia’s busiest airport is currently experiencing a significant decline in passenger numbers because of the pandemic. But it is worth remembering that it will recover in time when the crisis clears, as will its distributions.

I expect the airport operator to pay a 27 cents per share distribution in FY 2021, before being able to lift it back up to 37 cents per share distribution in FY 2022.

Motley Fool contributor James Mickleboro does not own shares of Sydney Airport.

Lloyd Prout: Jumbo Interactive Ltd (ASX: JIN)

Jumbo is personally one of my most recent stock purchases. I believe that the business will receive a tailwind from COVID-19. For health reasons, I see a behavioural shift away from physical tickets towards online sales.

Although we may have economic struggles in the short term, punters who are trying to get rich quick will continue to buy tickets over the long term.

Jumbo isn’t cheap with shares trading at around 30 times earnings. With that said, because of its capital-light business model, it should provide a great total return with capital growth combined with a solid 3% fully franked dividend. 

Motley Fool contributor Lloyd Prout owns shares of Jumbo Interactive Ltd and expresses his own opinion.

Cathryn Goh: Dicker Data Ltd (ASX: DDR)

Dicker Data is an ASX dividend star with a policy to distribute 100% of after-tax profits to shareholders, paid in quarterly instalments. As a wholesale distributor of hardware and software, Dicker Data has been experiencing an uptick in demand as organisations turn to remote working solutions to ensure business continuity.

Coupled with its recent capital raising, the company appears to be in a strong position to deliver on its proposed FY20 dividend payments. Just yesterday, Dicker Data announced a 7.5 cent interim dividend which will trade ex-dividend on Thursday, 14 May for payment in early June.

Motley Fool contributor Cathryn Goh does not own shares of Dicker Data Ltd.

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*Returns as of 7/4/20

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Amcor Limited, Dicker Data Limited, Macquarie Group Limited, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Jumbo Interactive 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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