Are you…
A) Contemplating retirement and worrying about whether you'll have enough income to live on?
B) Keen to help offset the soaring cost of living without having to work longer hours?
C) Hoping to benefit from franking credits like countless other Aussies have been doing over the past 30+ years?
D) Disillusioned by the interest rate your bank is offering in exchange for locking up your hard-earned cash?
E) Not really sure but just love the idea of getting paid for doing not much of anything?
If you answered yes to any of the above, you may be in the market for some ASX dividend shares. These types of stocks regularly divvy out a portion of their profits to their owners — the shareholders! And, with any luck (as well as top-notch management!), will also deliver share price gains over the long term as well.
But the ASX is awash with dividend shares so the decision on what to buy can be daunting.
For their thoughts, we asked our Foolish writers which income-paying stocks they are loving the look of right now. Here is what they said:
6 best ASX dividend shares for February 2023 (smallest to largest)
- Best & Less Group Holdings Ltd (ASX: BST), $238.82 million
- Nick Scali Limited (ASX: NCK), $967.95 million
- Transurban Group (ASX: TCL), $42.47 billion
- Rio Tinto Ltd (ASX: RIO), $47.01 billion
- ANZ Group Holdings Ltd (ASX: ANZ), $75.35 billion
- Commonwealth Bank of Australia (ASX: CBA), $185.83 billion
(Market capitalisation as of 1 February 2023)
Why our Foolish writers love these ASX passive-income stocks
Best & Less Group Holdings Ltd
What it does: Best & Less describes itself as a value apparel specialty retailer with around 250 stores and an e-commerce offering. It wants to be the number one choice for families buying baby and kids' value apparel in Australia and New Zealand through Best & Less in Australia and Postie in New Zealand.
By Tristan Harrison: The Best & Less share price is down around 50% since the start of February 2022. This has had the effect of boosting the company's possible payout ratio.
Commsec numbers suggest this ASX All Ords share could pay an annual dividend per share of 23.5 cents in FY24, translating into a FY24 grossed-up dividend yield percentage in the mid-teens.
While FY23 may be tricky for profitability, I think FY24 could be positive, particularly as Best & Less adds to its store network. Six new stores are scheduled for opening in the second half of FY23, and the company is also refurbishing some existing stores. It is committed to paying a dividend of 60% to 80% of net profit.
Motley Fool contributor Tristan Harrison does not own shares in Best & Less Group Holdings Ltd.
Nick Scali Limited
What it does: Nick Scali is a furniture retailer and owner of an eponymous brand as well as the Plush – Think Sofas brand. It has more than 100 stores across Australia and New Zealand as well as a successful e-commerce platform.
By Bronwyn Allen: The Nick Scali share price has had a great start to 2023, with a 15% gain already, so I reckon value investors are already onto this one. Despite this, I believe the trailing gross dividend yield is still very attractive at 8.3%.
Sales are increasing, partly due to the company's first major acquisition — the purchase of Plush in November 2021, with integration largely completed at the end of FY22.
I'm excited to see the FY23 first-half (1H FY23) numbers due out next Monday (6 February) to get a better picture of how Plush is growing the company's earnings. Nick Scali has guided a 57% to 66% increase in net profit after tax (NPAT) in 1H FY23 compared to 1H FY22.
Motley Fool contributor Bronwyn Allen owns shares in Nick Scali Limited.
Transurban Group
What it does: Transurban is a large-scale operator of tolled roads. It has a near monopoly on Sydney's toll roads but also owns roads in other capital cities, as well as in North America.
By Sebastian Bowen: Transurban's reputation as one of the ASX 200's safest dividend shares was trashed during the pandemic years. But the company has bounced back steadily ever since the dark days of 2020.
What I believe makes Transurban such an attractive dividend share is its resistance to inflation.
Most of Transurban's toll roads are contractually permitted to increase their tolls in line with inflation, protecting the company's earnings base from erosion.
As such, I think this is a useful company to have in any income portfolio – especially with its dividend yield closing in on 4% at recent pricing.
Motley Fool contributor Sebastian Bowen does not own shares in Transurban Group.
Rio Tinto Ltd
What it does: Rio Tinto is one of the globe's largest miners with a portfolio of world-class operations across a range of commodities.
By James Mickleboro: I think Rio Tinto could be a top option for ASX income investors in February. That's because China's reopening looks set to support robust demand for copper and iron ore, which bodes well for commodity prices.
In fact, as things stand, Rio Tinto is generating significant free cash flow, which is expected to underpin some big dividends in the near term.
Goldman Sachs, for example, is currently forecasting fully-franked dividends per share of US$4.40 (A$6.25) in FY 2023 and US$5.70 (A$8.10) in FY 2024. This equates to yields of 4.9% and 6.35%, respectively, at the time of writing.
Goldman has a buy rating and a $134.40 price target on the mining giant's shares.
Motley Fool contributor James Mickleboro does not own shares in Rio Tinto Ltd.
ANZ Group Holdings Ltd
What it does: The ANZ we know and, arguably, love was born more than 50 years ago and is now one of Australia's 'big four' ASX 200 banks. Nowadays, it provides banking and financial services to millions of retail and business customers across 32 markets.
By Brooke Cooper: ANZ is both the highest-yielding and cheapest of the big four banks on a price-to-earnings (P/E) ratio basis. It currently boasts a 5.9% dividend yield and a P/E ratio of 10.65, according to CommSec data.
I also like the company's proposed acquisition of Suncorp Group Ltd (ASX: SUN)'s banking division – set to bring greater exposure to the Queensland market. The sunshine state was crowned Australia's best-performing economy by CommSec's latest State of the States report.
Finally, ANZ is favoured by both Macquarie and Citi. They each have an equivalent buy rating on the stock, while the latter has given it a $29.25 price target and expects the bank to grow its dividends in the future.
Motley Fool contributor Brooke Cooper does not own shares in ANZ Group Holdings Ltd or Suncorp Group Ltd.
Commonwealth Bank of Australia
What it does: CBA provides a range of financial services including retail and business banking, funds management, superannuation, insurance, and broking services. With a market cap of some $185 billion, it's Australia's largest bank and the second-biggest stock trading on the ASX.
By Bernd Struben: CBA is well-respected as a long-term, reliable dividend stock.
The bank has delivered two fully franked dividends per year for well over a decade, including during the pandemic-addled 2020 market turmoil.
CommBank also offers a dividend reinvestment plan (DRP).
At the current share price, CBA pays a 3.6% trailing dividend yield, having paid out $3.85 per share in 2022. But that could well grow.
Morgan Stanley is forecasting the CBA dividend to increase the most of any of the big four banks this year to $4.50 per share, up 17% year on year.
The CBA share price has also been a strong performer, gaining almost 9% so far in 2023 and around 17.2% over the past 12 months.
Motley Fool contributor Bernd Struben does not own shares in Commonwealth Bank of Australia.
