The S&P/ASX 200 Index (ASX: XJO) is a wonderful place to find ASX dividend shares with impressive credentials.
It's particularly beneficial to own Australian companies for dividends because of the franking credits that are attached to dividend payments. This means investors receive credits on their tax return that help improve their tax position. For lower-income earners, the franking credits can turn into a tax refund. Ultimately, franking credits have the effect of boosting the after-tax yield for Australian investors.
Both of the businesses below offer very compelling dividend yields, growing payouts and strong market positions.
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Telstra Group Ltd (ASX: TLS)
Telstra is the leading Australian telco on a number of measures, including network coverage and the number of subscribers. The business also has a very strong base of spectrum assets and scale advantages.
The company's ability to attract subscribers (including wholesale) and raise prices is helping drive earnings higher.
Profit is the key input for what level of dividend a business can pay, with the actual dividend declared by the board of directors.
In FY25, the company achieved earnings per share (EPS) growth of 3.2% to 19.1 cents, cash EPS grew 12% to 22.4 cents, and it hiked its annual dividend per share to 19 cents.
Considering Australia is becoming increasingly technological, I think the outlook is very promising for the ASX blue-chip share.
Plus, if 5G (or 6G) is capable of replacing NBN services in houses, I think Telstra could boost its profit margins significantly for those home broadband subscribers. Plus, I believe the ASX dividend share has very defensive earnings, given how important the internet is for households and businesses alike.
According to the dividend forecast on Commsec, the business could pay a grossed-up dividend yield of around 6%, including franking credits, at the time of writing. The business has steadily increased its payout following the increase in FY22.
Coles Group Ltd (ASX: COL)
As one of the largest supermarket businesses in Australia, Coles has a very important role in the country. It provides an essential service – we all need to eat. This gives it very defensive earnings, in my view.
The company has been doing a good job at outperforming Woolworths Group Ltd (ASX: WOW) in terms of sales growth in recent times.
In FY25, the business reported 4.3% growth in supermarket sales (and total sales growth of 3.6%), a 6.8% increase in underlying operating profit (EBIT), and a 3.1% increase in underlying net profit. This helped fund a 1.5% increase in the annual dividend per share to 69 cents.
At the time of writing, it could pay a grossed-up dividend yield of around 5% in FY26, including franking credits, according to the projection on Commsec.
The business has impressively increased its annual dividend every year since it first started paying one in 2019.
In the first eight weeks of FY26, Coles' supermarket sales increased by another 4.9% (or 7% excluding tobacco). This increase was supported by continued growth in volumes, as the company continues to invest in customer value and experience.
Following its significant investments in automated warehouses, I believe Coles is well-positioned to deliver ongoing profitable growth, which is a promising sign of potential dividend growth.
