Some investors may be turning to ASX dividend shares to boost their income in this era of very low interest rates.
The Reserve Bank of Australia (RBA) has pushed the official interest rate to almost 0%. But ASX dividend shares are known for offering higher yields than bank accounts.
Here are three examples of businesses that have dividend yields of 5% or more:
Magellan Financial Group Ltd (ASX: MFG)
This is a funds management business which has billionaire Hamish Douglass at the helm as both the chair and chief investment officer (CIO).
The Magellan share price has risen by around 140% since the start of 2019, which was comfortably higher than the return of the S&P/ASX 200 Index (ASX: XJO).
In FY20 it paid a total annual dividend of 214.9 cents per share which, when franking credits are included, amounts to a grossed-up dividend yield of just over 5%. That dividend was 16% higher than what was paid in FY19.
Magellan has a high dividend payout ratio, which contributes to its dividend yield being more than 5%. It generated diluted earnings per share (EPS) of 218.3 cents, meaning that Magellan’s payout ratio was 98.4%.
In FY20 its average funds under management (FUM) was up 26% to $95.5 billion. Magellan’s FUM at the end of September 2020 was 7% higher than the FY20 average at just over $102 billion.
The fund manager also recently invested in a new investment bank called Barrenjoey.
Growthpoint Properties Australia Ltd (ASX: GOZ)
Growthpoint Properties is an ASX real estate investment trust (REIT) which invests in “high-quality industrial and office properties across Australia.”
The REIT recently gave an update for the first quarter of FY21. It said that its weighted average lease expiry (WALE) increase to 6.4 years and the portfolio occupancy increased to 96%.
Growthpoint revealed that billings remained “strong” with more than 99% of FY21 first quarter total billings collected to date.
Management boasted of having a robust balance sheet, with gearing of 32.2% well below its target range.
Growthpoint Properties’ FY21 distribution guidance was reaffirmed at 20 cents per share, which equates to a distribution yield of 5.6% for the ASX dividend share.
JB Hi-Fi Limited (ASX: JBH)
JB Hi-Fi is the third ASX dividend share example in this article.
The electronics retailer has increased its dividend every year in a row going back several years.
JB Hi-Fi’s growth has accelerated during the COVID-19 period. In FY20 it generated total sales growth of 11.6%, underlying earnings before interest and tax (EBIT) and underlying net profit after tax (NPAT) grew by 33.2%. Underlying EPS went up 33.2% to 289.6 cents.
The profit growth assisted the ASX dividend share’s annual FY20 dividend growth of 33.1% to 189 cents.
JB Hi-Fi has recently delivered a FY21 first quarter sales update. It said that in the three months to 30 September 2020, JB Hi-Fi Australia total sales growth was 27.3% with comparable sales growth of 27.6%.
JB Hi-Fi New Zealand total sales declined by 2.5% with a comparable sales decline of 2.5%.
The Good Guys also reported that its total sales grew by 30.9% with comparable sales growth of 30.9%.
The electronics retailer announced that with the lifting of the Victorian Government’s stage 4 restrictions, 46 JB Hi-Fi stores and 21 The Good Guys stores have all reopened on 28 October 2020.
At the time of the first quarter update, JB Hi-Fi CEO Richard Murray said: “Our online businesses have continued to scale and meet the needs of our customers in a period where restrictions have impacted their ability to visit our stores. This online growth combined with continued sales momentum in stores across the rest of Australia, has resulted in a strong start to FY21 and positions us well as we enter the key Christmas trading period.”
Using the current JB Hi-Fi share price, it has a trailing grossed-up dividend yield of 5.6%.