12 ASX dividend shares with yields over 10%. Are they too good to be true?

Is a 10% yield a good or a bad sign for an income share?

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Key points

  • The ASX is home to dozens of high-yielding dividend shares
  • Some are even offering dividend yields of above 10% right now
  • But a high yield can be more of an indication of a dividend trap, rather than a lucrative investment

The ASX boards are home to hundreds of shares. And many of them pay out dividends to their investors every year.

The relationship between the dividends per share that a company pays and the price that a company's shares trade at produces the metric we know as the dividend yield.

Most ASX shares offer investors dividends yields of between 3 and 6%. But some go higher than that. In fact, the ASX houses many shares that currently have a trailing yield of above 10%. Here are a dozen such shares:

ASX dividend shareLast share price

(at the time of writing)
Dividends per

share (trailing)

dividend yield
Terracom Ltd (ASX: TER)$0.63$0.22535.89%
Yancoal Australia Ltd (ASX: YAL) $5.53$1.227122.19%
Regal Investment Fund (ASX: RF1)$2.83$0.445615.8%
BSP Financial Group Ltd (ASX: BFL)$4.87$0.615914.92%
Magellan Financial Group Ltd (ASX: MFG)$7.98$1.158114.51%
Australian Clinical Labs Ltd (ASX: ACL)$3.49$0.4813.71%
Liberty Financial Group Ltd (ASX: LFG)$3.93$0.4913.41%
Zimplats Holdings Ltd (ASX: ZIM)$25.63$2.962111.56%
New Hope Corporation Limited (ASX: NHC)$5.30$0.6111.51%
Woodside Energy Group Ltd (ASX: WDS)$33.64$5.353411.16%
Office Centuria REIT (ASX: COF)$1.44$0.147410.23%
Whitehaven Coal Ltd (ASX: WHC)$7.18$0.7210.03%

So are these ASX dividend shares all screaming buys? Can investors really expect to get at least 10 cents on every dollar invested back every year by investing in these companies?

When is a 10% yielding ASX divided share a trap?

Well, not so fast. As a rule, income investors should be very careful when dealing with an ASX dividend share offering a yield of 10% or higher. As we went through earlier, the dividend yield is a function of a company's share price, as well as its raw dividends per share. Thus, if the market is pricing a dividend share with a high yield, it is usually for a reason.

Looking at this list, we can see it is dominated by ASX energy shares. Terracom, Yancoal, Whitehaven, and New Hope are all ASX coal miners, and Woodside is an oil share. These companies' earnings (and thus dividends) are notoriously cyclical and depend almost entirely on the coal and oil prices at the time.

Recently, high energy prices have turbocharged these companies' profitability. But investors know that energy pricing booms don't last forever, and neither do the dividends that are funded by them. So that's probably why these companies are seemingly offering such large dividend yields right now.

It's not just ASX energy shares either

The other ASX dividend shares listed here also have their own problems. Magellan is a fund manager that has dramatically fallen from grace over the past few years. I would wager that it would be hard to find any serious investor who expects this company to pay out the same $1.16 in dividends per share over the next year as it did the last.

As such, you should always take an ASX dividend share offering a yield of 10% or higher as nothing more than an invitation to dig a little deeper.

It is entirely possible to find a 10%-er that will indeed prove to be a solid and reliable income stock to invest in. But more often than not, these types of income shares turn out to be dreaded dividend traps — luring investors in with a seemingly high yield, only to cut it down the road.

So choose your high-yielding dividends wisely. This is a dangerous field to be digging in for income.


Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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