Believe it or not, the S&P/ASX 200 Index (ASX: XJO) is not a very diverse universe of 200 businesses.
The finance (27.1%) and materials (25.6%) sectors together make up more than half of the index weight, according to S&P Global.
"According to Morgan Stanley, Australian retail investors own roughly 48% of the big four [banks]'s float as of late 2022," the Global X Research team said on a blog post.
"Miners made up the majority of the top 10 most purchased shares on CommSec and CMC – the two largest retail brokerage platforms by market share – over the past 12 months.
This means that if you already own shares in an exchange-traded fund (ETF) that tracks the ASX 200, you are already substantially invested in these industries.
So when it comes to picking specific dividend shares, it might be worth diversifying away from banks and miners.
Earnings sustainability leads to the 'best income producers'
Shaw and Partners portfolio manager James Gerrish was recently asked what his favourite dividend stocks are outside of finance and resources.
Firstly, he warned high yields don't always make the best investments.
"Important to recognise that we don't simply look at the size of the dividend," Gerrish said in a Market Matters Q&A.
"We focus more on the sustainability of the underlying earnings and that will generally translate into good income over time."
With that caveat, he named these six stocks as the best income producers:
| ASX 200 stock | Dividend yield |
| Telstra Group Ltd (ASX: TLS) | 3.72% |
| Wesfarmers Ltd (ASX: WES) | 3.59% |
| Metcash Limited (ASX: MTS) | 5.63% |
| Centuria Capital Group (ASX: CNI) | 6.49% |
| APA Group (ASX: APA) | 5.1% |
| AGL Energy Limited (ASX: AGL) | 2.1% |
Gerrish's team doesn't currently own shares in APA Group or AGL, but would buy into them if a dip came along.
Both Telstra and Wesfarmers have already performed strongly this year, gaining 9.75% and 14.8%, respectively, year to date.
Grocery provider Metcash has risen 2.5% this month, while Centuria has rocketed 13.25%.
