While the banks are popular options for income investors, they may not be the most attractive picks these days.
With their shares at record highs, lower than average dividend yields, and flat dividend outlooks, there may be better Australian shares out there for investors to buy.
But which shares? Let's look at three that could be top picks for investors looking for dividend growth. They are as follows:
IPH Ltd (ASX: IPH)
The first Australian share that could be a good option for dividend growth is IPH.
It is a leading intellectual property (IP) services provider with a client base spanning Fortune Global 500 companies, SMEs, and research organisations. It operates in 10 jurisdictions and over 25 countries.
Thanks to a combination of acquisitions and its defensive earnings, IPH has been able to grow its dividend each year for the last decade. The good news is that Goldman Sachs expects this trend to continue.
It is forecasting fully franked dividends of 36 cents per share in FY 2025 and 39 cents per share in FY 2026. Based on its current share price of $4.86, this implies dividend yields of 7.4% and 8%, respectively.
Goldman Sachs has a buy rating and a price target of $7.50 on IPH shares.
Smartgroup Corporation Ltd (ASX: SIQ)
Another top Australian share for income investors to look at is Smartgroup.
It is a leading provider of employee benefits, fleet management, and software solutions. At the last count, it had over 400,000 salary packages and 64,000 novated leases under management.
Bell Potter is bullish and highlights its positive outlook and attractive valuation. It points out that Smartgroup is "well priced given a fwd P/E of ~14.5x, a defensive client base, [and] earnings tailwinds."
In respect to income, the broker expects Smartgroup to lift its fully franked dividend to 53.3 cents in FY 2024 and then 59.7 cents in FY 2025. Based on the latest Smartgroup share price of $7.73, this implies dividend yields of 6.9% and 7.7%, respectively.
Bell Potter has a buy rating and a $10.00 price target on Smartgroup shares.
Transurban Group (ASX: TCL)
Finally, UBS thinks that Transurban could be a top Australian share to buy.
It is a toll road operator with a high-quality portfolio of roads across Australia and North America.
UBS believes that the company is well-placed to pay increasing dividends in the coming years. After paying out dividends per share of 58 cents in FY 2023 and 62 cents in FY 2024, the broker is forecasting increases to 65 cents in FY 2025 and then 69 cents in FY 2026. Based on its current share price of $13.10, this equates to 5% and 5.25% dividend yields, respectively.
UBS has a buy rating and $14.75 price target on Transurban's shares.
