February reporting season highlighted relatively flat earnings growth for ASX 200 shares, but an improvement in dividends and cash holdings. Here are the ASX 200 dividend shares that are currently paying the highest dividends.
1. Fortescue Metals Group Ltd (ASX: FMG)
A roaring iron ore spot price has earned Fortescue the title of highest paying ASX 200 dividend share. Unlike other shares that might be paying a higher yield due to a fall in share price, higher iron ore prices have translated to record earnings and cash flow, and subsequently a market-leading dividend yield of 11.70%.
Brokers think the Fortescue share price could bounce back in the short-medium term after it went ex-dividend last week. On 4 March, UBS rated Fortescue as a buy with a price target of $25. While Macquarie Group Ltd (ASX: MQG) maintained an outperform rating with a price target of $25.50 on the same day.
2. AGL Energy Limited (ASX: AGL)
AGL finds itself as the second-highest yielding ASX 200 dividend share for all the wrong reasons. Its shares have been continuously trending lower year-on-year since 2017, losing more than 60% in value. However, its shares have continued to underperform in the new year, down 20% year-to-date.
Despite paying a dividend yield of 9.40%, analysts at UBS have retained a sell rating with a $10.10 price target. Trading conditions have been tough for the energy company, with weak wholesale prices for electricity and renewable energy certificates, and lower gross margins in wholesale gas. Despite the company's efforts to reduce costs, UBS believes its earnings will continue to slide.
While a yield of 9.40% is attractive, the challenge with AGL remains for both its weak earnings and downward trending share price.
3. Aurizon Holdings Ltd (ASX: AZJ)
Australia's largest rail freight operator seems to be a better version of AGL. While its share price and earnings have remained relatively flat for the last 8 years, it beats AGL's tumbling share price.
The company's half-year results highlight a 2% fall in revenue to $1.49 billion while Earnings before interest, tax, depreciation and amortisation (EBITDA) was up 1% to $738.3 million. Its solid earnings have translated to a 7.60% dividend yield.
