In times of rising interest rates and market turbulence, many investors turn to dividend-paying ASX shares.
The theory is that while capital growth is anaemic, an income stream helps investors endure the tough part of the cycle before it turns.
With this in mind, Shaw and Partners portfolio manager James Gerrish was recently asked if any ASX dividend shares are worth grabbing for cheap during the current sell-off.
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ASX shares are the place to be if you want dividends
The Australian market is particularly favourable for income investing.
This is because of the country's franking credit rules and the dominance of big banks and mining companies on the ASX.
While Gerrish's team likes the banks for dividends, most Australian investors are overweight in that sector.
"So it makes sense to look elsewhere from a diversification perspective," he said in his Market Matters Q&A.
"The miners are screening well for income, however, their earnings are very cyclical and we are reticent to think of them as consistent income payers – they simply ebb and flow with the economic cycles."
So if you remove banks and resources from the picture, what's left?
Four of the best, going for cheap
Gerrish named four ASX dividend shares that are trading at attractive prices after the recent sell-off:
- Metcash Limited (ASX: MTS)
- Stockland Corporation Ltd (ASX: SGP)
- Telstra Corporation Ltd (ASX: TLS)
- Wesfarmers Ltd (ASX: WES)
Supermarket wholesaler and operator of IGA retail network, Metcash, pays out a handy 5% dividend yield. The share price has lost just 3.8% year-to-date.
Real estate developer Stockland has lost almost 16% in value so far in 2022 but does give out a handsome 7.17% yield.
"We see a lot of value in property stocks after recent weakness," said Gerrish.
"We also like Centuria Capital Group (ASX: CNI) and National Storage REIT (ASX: NSR), to name a few."
Old income investor favourite Telstra is currently paying out a 2.8% yield. The share price has dropped 8% year-to-date though.
Shares for conglomerate Wesfarmers have plunged a painful 29.4% so far this year, but its shareholders do reap a 4% dividend yield.
Gerrish left investors seeking income with one final piece of advice.
"Importantly, look for companies with some growth over time so that dividends will increase at a greater clip than inflation."
