The good news for income investors is that there are plenty 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 July are listed below. Here's what the broker is saying about them:
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Telstra Group Ltd (ASX: TLS)
This telco giant could be an ASX 200 dividend share to buy according to Morgans. The broker has an add rating and a $4.70 price target on Telstra's shares.
Morgans like the company due to its strong earnings momentum and the potential for value to be unlocked from divestments. It commented:
After a major turnaround, TLS has emerged in good shape with strong earnings momentum and a strong balance sheet. In late CY22 shareholders voted on Telstra's legal restructure, which opens the door for value to be released from the separation of TLS's infrastructure and core mobile business. TLS currently trades on ~8x EV/EBITDA. However, some of TLS's high quality long life assets like InfraCo are worth substantially more, in our view. We don't think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with progressive price rises underpins positive earnings momentum and means TLS remains well placed for the year ahead.
As for dividends, it is forecasting fully franked dividends of 17 cents per share in FY 2023 and FY 2024. Based on the current Telstra share price of $4.26, this will mean dividend yields of approximately 4%.
Westpac Banking Corp (ASX: WBC)
Morgans remains positive on this banking giant and believes it is an ASX 200 dividend share to buy in July. The broker has an add rating and a $24.22 price target on its shares.
Its analysts believe that Australia's oldest bank has the most return on equity improvement potential among the big four. The broker explains:
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.
As for dividends, Morgans is expecting fully franked dividends per share of $1.49 in FY 2023 and $1.52 in FY 2024. Based on the current Westpac share price of $20.85, this will mean yields of 7.15% and 7.3%, respectively.
