Quality S&P/ASX 200 Index (ASX: XJO) dividend shares will likely remain high on investor wish lists in 2023.
And that's especially true for dividend stocks paying fully franked dividends.
With inflation looking to remain well above the RBA's target range next year and governor Philip Lowe predicting more interest rate rises on the horizon, ASX 200 dividend shares should continue to offer investors reliable income streams.
According to Plato Investment Management's managing director Don Hamson, "I think the current environment is quite similar to 1994 when global interest rates went up, inflation spiked, and there was negative returns on bonds and equity, yet dividends kept rising."
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ASX 200 shares to deliver a 6.0% gross dividend yield
Plato forecasts that ASX 200 shares will deliver a gross yield of 6.0% in 2023.
"Our modelling is projecting that at an index level in 2023, the ASX 200 will deliver a cash yield of 4.4%, and 6.0% when including franking credits," Hamson said.
According to Hamson:
Despite much being said about the impact of rate rises on cash-backed asset classes like term deposits and bonds, investors who rely on them continue to lose money in real terms, with inflation rising faster than interest rates.
The Australian stock market is also one of a select few that pays imputation, or franking, credits, reducing investor tax burdens. And Hamson advises seeking out stocks offering 100% franked payouts.
"I think it goes without saying that favouring companies that pay fully franked dividends, where possible, in 2023 is a no-brainer," he said.
Three specific ASX 200 dividend shares that Plato believes will be "strong dividend payers" in 2023 are:
- Macquarie Group Ltd (ASX: MQG), 3.8% trailing yield
- Woodside Energy Group Ltd (ASX: WDS), 9.0% trailing yield
- BHP Group Ltd (ASX: BHP), 9.8% trailing yield
A word of caution
Hamson adds that investors should be aware of dividend traps in the year ahead.
Remember, the yields you see (and those quoted above for the three ASX 200 dividend shares) tend to be trailing yields. That means they're based on current share prices and the dividends paid out over the past 12 months. There are no guarantees those payments will be maintained in 2023.
According to Hamson:
We think many companies in the resources and financials sectors are likely to continue to be strong and sustainable dividend payers into 2023. However, it's imperative investors avoid dividend traps – and there'll be many to emerge over the coming year.
With that word of caution noted, Hamson added, "We believe investors must move to where the dividends are flowing."
How have these three ASX 200 dividend shares been performing?
Atop their dividend payouts, here's how these ASX 200 shares have been performing: the BHP share price has gained 16% over the past 12 months; Woodside shares have gained 53%; and the Macquarie share price has gone the other direction, down 17%.
You can see their performance in the charts below:
