There's no end to the advice offered to investors seeking ASX dividend shares to buy. Additionally, individual investors will likely search for winners in a way that best suits them and their goals.
If you're looking to build an ASX dividend shares 'wish list' but not sure where to start, you've come to the right place.
As the saying goes, 'failing to plan is planning to fail'. That's why I believe it's a good idea to jot down a 'best buys now' list when building a portfolio of ASX dividend shares.
That way, I can easily identify where my cash will go, what its anticipated growth prospects are, and whether I am diversified to my liking before jumping in with both feet.
Often the best place to begin a 'best ASX dividend shares to buy now list' is by finding a few quality shares trading at cheap prices.
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How I'd build a 'best ASX dividend shares to buy now' list
Identify quality ASX dividend shares
There are plenty of factors that can help determine if an ASX dividend share is 'high quality'. Personally, I tend to look for shares with strong balance sheets, notable competitive advantages, and consistent dividends.
A company that corners its market with an irreplaceable offering is ideal. Though, a loyal clientele and ability to grow is also a major competitive advantage.
A strong balance sheet can help bolster that growth. It can also help a company navigate tough times.
In the case of ASX dividend shares, a strong balance sheet might also suggest a company is managing its capital well, thereby reducing the risk they'll reduce or forego dividends when things don't go to plan.
But investors would be wise to avoid being blinded by a company's strengths. Nearly every business has a weakness. Identifying them can be helpful when assessing potential risk factors.
There are plenty of other factors worth considering on an individual level. Different investors have different goals, investment timeframes, and risk tolerances.
Thus, individuals might choose to search for dividend-paying growth shares over blue-chip stocks, or vice versa, for instance.
Seek out cheap stocks
A 'best ASX dividend shares to buy now' list should also consider if 'now' is the right time to buy into a particular company.
That means, once I'd found a few quality shares that suit my investment style, I would determine if they're trading for reasonable prices.
There are many measures that can be referred to when considering if an ASX dividend share represents good value. Some examples include dividend yields, price-to-book (P/B) ratios, and price-to-earnings (P/E) ratios.
These are all simple measures that rely on data easily found in a company's earnings reports. While they're not perfect – and they certainly can't predict the future – they can provide a good starting point in accessing value.
Of course, a consistently high dividend yield is the dream. However, it's worth considering if a company can continually afford to offer such yields, particularly if its operating conditions shift in the future.
Derisk, derisk, derisk
Finally, I would contemplate how diverse my 'best ASX dividend shares to buy' list is, and how diverse it needs to be. That means investing in numerous companies across various sectors.
A strategically diverse portfolio provides protection from single-sector or company downturns. It also sees an investor exposed to a greater number of opportunities across the share market.
Though, diversification doesn't guarantee returns or downside protection.
