Do you remember the Omicron variant of the COVID-19 virus?
When that broke out in November 2021, the globe collectively gasped, "No, not again".
In the investment world, this was the beginning of a massive selloff of growth shares.
People around the world were tiring of lockdowns, and inflation was already creeping up from pent-up consumer demand. Shrewd analysts were already betting that interest rates would have to head up.
That pivot also meant that ASX dividend shares were fashionable again after being ignored for a decade.
Australians are fortunate in this regard, with favourable tax laws leading to a plethora of stocks trading on the local bourse with high dividend yields.
So if you theoretically had $5,000 to invest, these are the dividend stocks I would be most tempted to buy at the moment:
Shareholder return is 'attractive'
Real estate might be reeling after 12 interest rate hikes over the last 14 months, but perhaps that's why HomeCo Daily Needs REIT (ASX: HDN) looks like such a bargain.
The share price has fallen 14.2% over the past year and 5.4% since the start of 2023.
Although its tenants are retailers, Auscap analysts reckon HomeCo's fortunes aren't as cyclical as one might think.
"Its tenants are predominantly large, well-funded and highly profitable retailers who we think are low covenant risk, high-quality operators," they said in a memo to clients.
The Auscap team added that consumer spending on household goods was not as volatile as investors perceived.
"Total nominal retail sales in Australia have never grown at less than 2.2%. Expenditure on household goods has only rarely and briefly gone negative year on year."
The stock pays out a tidy dividend yield of 7%, but it also boasts capital growth potential.
"We view the total shareholder return as attractive, given the risk profile," read the Auscap memo.
"We are also enthused by management's growth initiatives and the potential for HDN to benefit from any future improvement in sentiment towards the listed real estate sector."
'Long and bullish'
BHP Group Ltd (ASX: BHP) has always been a reliable dividend producer for many Australian investors.
But it's looking especially attractive now, with Market Matters portfolio manager James Gerrish last week naming the Big Australian as his favourite ASX iron ore stock.
"Market Matters is long and bullish on BHP in our active income and flagship growth portfolios, with no plans to take profit in either."
The mining stock is handing out a whopping 8.8% dividend yield, which is fully franked, no less.
For a small-cap dark horse, SG Fleet Group Ltd (ASX: SGF) offers both growth potential and a high income.
New rules to incentivise Australians to buy low-emissions vehicles have helped its fortunes greatly in 2023.
"Recent changes to the fringe benefits tax for electric and low-emission vehicles in Australia have made it more attractive to lease rather than buy these vehicles, benefiting SGFleet's business model," finance expert and accountant John-Louis Judges told The Bull last month.
"There is an expected increase in demand for SG Fleet's services following [the] global… shift towards environmentally friendly vehicles."
SG Fleet shares currently pay out a 7.1% dividend yield that's fully franked.
Check out what your $5,000 turned into
If you bought an equal dollar amount of shares in each of those three companies, your collective dividend yield would stand at 7.63%.
Let's say that after the initial $5,000 investment, each month you managed to save enough to buy $100 more of each stock. And you immediately reinvested the dividends.
That means after just 10 years, your nest egg will have grown to $61,674.
If you then stopped reinvesting the dividends, you will receive a passive income each year of $4,705.
After adding franking benefits, that's pretty much your entire initial investment amount given back to you every year in perpetuity.
Nice work.
