Some dividend yields are looking sky high right now – hello, Flight Centre Travel Group Ltd (ASX: FLT). But uncertainty is also at highly elevated levels. Dividends are inherently uncertain. They can be cut or not paid at all if funds are not available. Investors tend to prefer some degree of certainty around whether they will receive investment income. Companies that operate in industries with reliable demand are more likely to be able to pay consistent dividends. Here we take a look at three ASX shares for dependable dividends.
3 dependable ASX dividend shares
AGL Energy Limited (ASX: AGL)
Electricity is a non-negotiable necessity, so the revenues of power generator AGL are fairly certain. AGL targets a payout ratio of 75% of underlying profit after tax and is currently offering a dividend yield of 6.68%. In the first half of FY20, AGL declared an interim dividend of 47 cents per share. This was down 8 cents per share, consistent with AGL’s payout ratio as underlying profit was down 20% for the half year. This was due to a power station outage, lower wholesale gas prices, and reduced gas volumes. AGL has predicted full year profits in the upper half of its guidance range of between $780 million and $860 million.
Fortescue Metals Group Limited (ASX: FMG)
Fortescue produces iron ore which is the main ingredient in steel. Iron ore is the world’s most used metal accounting for about 95% of metal tonnage produced worldwide. This ASX dividend share targets a payout ratio of 50% to 80% of net profits and is currently offering a dividend yield of 5.74%. In the June quarter, Fortescue reported record iron ore shipments of 47.3 million tonnes. Full year shipments were 178.2 million tonnes, exceeding the top end of guidance. FY21 guidance is for iron ore shipments of 175 – 180 million tonnes. Fortescue paid a fully franked FY20 interim dividend of 76 cents per share, up from 30 cents per share in 1H19.
Orora Ltd (ASX: ORA)
Packaging provider Orora supplies customers with glass bottles, aluminium cans, caps and closures, boxes, cartons, and more. Packaging is ubiquitous – a necessity in making products available for consumption. This ASX dividend share is currently offering a yield of 7.07% but some have questioned how sustainable this is given Orora’s high payout ratio. Orora returned $600 million to shareholders earlier this year via a special dividend of $450 million and a capital return of $150 million. While COVID-19 will have a negative financial impact, however, Orora’s estimate limits this to $25 million in the second half.
Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group 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.
- How did ASX buy now, pay later shares perform in the latest quarter? – October 26, 2020 4:30pm
- How did ASX retail shares perform in the latest quarter? – October 26, 2020 1:30pm
- How did ASX cannabis shares perform last quarter? – October 26, 2020 10:26am