If you’re looking to add some dividend shares to your portfolio next week, then I think the three listed below could be top options.
Here’s why I think these dividend shares are in the buy zone:
Fortescue Metals Group Limited (ASX: FMG)
The first ASX dividend share to consider buying is Fortescue. I think it could be a good option due to the strong free cash flow it is generating thanks to favourable iron ore prices and its low costs. In respect to the latter, in FY 2021 Fortescue’s guidance is for cash costs of US$13.00 to US$13.50 per wet metric tonne. This is materially lower than the price it is commanding for its iron ore at present. Another positive is that the company has a strong balance sheet, which should mean it is well-positioned to return the majority of its free cash flow to shareholders. Based on the current Fortescue share price, I estimate that its shares offer a fully franked FY 2021 dividend yield of at least 5%.
Rural Funds Group (ASX: RFF)
Another top ASX dividend share to buy is Rural Funds. The agriculture-focused property group appears well-positioned to grow its distribution at a consistent and solid rate over the long term. This is thanks to its high quality assets and their long tenancy agreements which have periodic increases built into them. In FY 2021 Rural Funds expects to pay a 11.28 cents per share distribution. Based on the latest Rural Funds share price, this equates to a 5.5% yield.
Telstra Corporation Ltd (ASX: TLS)
A final ASX dividend share I would consider buying is Telstra. I like the telco giant due to its strong business model, defensive qualities, and generous dividend yield. Another positive is the progress it is making with its T22 strategy. This includes material cost cutting and the simplification of its business. Combined with the easing NBN headwind, I believe Telstra’s future is looking increasingly positive. Based on the current Telstra share price, I estimate that Telstra’s shares offer a fully franked 4.8% dividend 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 RURALFUNDS STAPLED and Telstra 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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