Income investors have a lot of options on the Australian share market.
To narrow things down, let's look at a two ASX dividend stocks that are popular with investors. Are they in the buy zone in December? Here's what analysts are saying about them:
Santos Ltd (ASX: STO)
The first ASX dividend stock we are going to look at is Santos. It is one of the leading independent oil and gas producers in the Asia-Pacific region, supplying energy needs across Australia and Asia.
Ord Minnett has been looking at the company recently and the good news is that it likes what it sees.
Its analysts highlight that Santos has a very positive free cash flow (FCF) outlook thanks to the Pikka and Barossa LNG operations. It said:
An estimated FCF yield of 20% once Pikka and Barossa LNG start producing, and rigorous control of how that extra cash is spent, implies to us that Santos will have plenty of room to return excess capital to shareholders either via an increased payout ratio or share buybacks. In our view, the medium-term prospects for Santos offer a compelling investment opportunity.
In respect to income, Ord Minnett is forecasting Santos to pay dividends per share of 41 cents in FY 2024 and then 44 cents in FY 2025. Based on the current Santos share price of $6.61 this would mean dividend yields of 6.2% and 6.65%, respectively.
Ord Minnett has a buy rating and $8.40 price target on the company's shares. This implies potential upside of 27% for investors.
Telstra Group Ltd (ASX: TLS)
Another popular option for income investors is Telstra. It is of course Australia's leading telecommunications and information services company.
Goldman Sachs thinks that it could be an ASX dividend stock to buy. This is thanks to its defensive earnings, positive growth outlook, and the opportunity to realise value through divestments. It explains:
We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive. We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn.
As for dividends, Goldman is forecasting fully franked dividends of 19 cents per share in FY 2025 and then 20 cents per share in FY 2026. Based on the current Telstra share price of $3.94, this represents dividend yields of 4.8% and 5.1%, respectively.
The broker has a buy rating and $4.35 price target on its shares. This suggests that upside of 10.5% is possible from current levels.
