The good news for income investors is that there are a large number of quality ASX 200 dividend shares to choose from on the Australian share market.
Two that have been tipped as best buys by analysts at Morgans in May are listed below. Here's what the broker is saying about them:
Image source: Getty Images
QBE Insurance Group Ltd (ASX: QBE)
The first ASX 200 dividend share that Morgans has on its best ideas list is insurance giant. The broker currently has an add rating and $16.96 price target on its shares.
It believes QBE is attractively priced, particularly given how rate increases are still flowing through its insurance book. In addition, the broker highlights its cost reductions plans and strong balance sheet as reasons to be positive. It explained:
With strong rate increases still flowing through QBE's insurance book, and further cost-out benefits to come, we expect QBE's earnings profile to improve strongly over the next few years. The stock also has a robust balance sheet and remains relatively inexpensive overall trading on 8x FY24F PE.
Morgans is expecting this to underpin dividends per share of approximately 83 cents in FY 2023 and 94 cents in FY 2024. Based on the current QBE share price of $15.35, this will mean yields of 5.4% and 6.1%, respectively.
Westpac Banking Corp (ASX: WBC)
Another ASX 200 dividend share that Morgans has on its best ideas list this month is banking giant Westpac. The broker has an add rating and $25.80 price target on its shares.
Its analysts are positive on Westpac due to their belief that Australia's oldest bank is well-placed to deliver the best return on equity improvement in the sector. It is expecting this to underpin some big dividend yields in the coming years. It commented:
We view WBC as having the greatest potential for return on equity improvement amongst the major banks if its business transformation initiatives prove successful. The sources of this improvement include improved loan origination and processing capability, cost reductions (including from divestments and cost-out), rapid leverage to higher rates environment, and reduced regulatory credit risk intensity of non-home loan book. Yield including franking is attractive for income-oriented investors, while the ROE improvement should deliver share price growth.
The broker is forecasting fully franked dividends per share of $1.53 per share in FY 2023 and $1.59 per share in FY 2024. Based on the current Westpac share price of $21.35, this will mean yields of 7.15% and 7.45%, respectively.
