Prior to the commencement of trading of its new Listed Investment Company (LIC), Solaris has named three top S&P/ASX 200 Index (ASX: XJO) dividend stocks it's backing to provide market beating passive income.
The initial public offering (IPO) for the Solaris Australian Equity Income Plus Ltd (ASX: SET) closes next Wednesday, 1 April.
With energy prices surging amid the ongoing Middle East conflict, two of the fund manager's top picks earn their keep drilling for and supplying oil and gas.
"While surging energy and oil prices are hammering household budgets, income investors exposed to key names in the energy sector are set to cash in," Solaris portfolio manager Charles Casey said.
The third ASX 200 dividend stock is a logistics solutions provider.
So, which passive income stars does Solaris recommend?
I'm glad you asked!
Image source: Getty Images
Woodside Energy Group Ltd (ASX: WDS)
First up we have Woodside Energy.
"Woodside's earnings and dividends are strongly supported by the current high gas prices," Casey said.
Commenting on the passive income outlook for this ASX 200 dividend stock,
A large volume of gas production from competitors in the Middle East, particularly Qatar, has been impacted. It could take three to five years to bring that production back online, meaning Woodside is supplying product into an undersupplied market and gaining a significant competitive advantage.
Importantly, Woodside has both the ability and the capacity to pay higher dividends. They have surplus franking credits, and we see strong potential for a dividend lift backed by these elevated earnings.
Woodside currently trades on a fully franked trailing dividend yield of 4.8%
Which brings us to the second company you might want to buy for its positive income outlook.
Ampol Ltd (ASX: ALD)
Solaris is also bullish on ASX 200 dividend stock Ampol.
"Ampol is a clear beneficiary of the higher oil refining margins currently being realised at their Lytton refinery," Casey said.
Commenting on the passive income outlook for the Aussie fuel supplier he added:
Oil refining earnings are cyclical, but at times like this they can deliver substantial windfall gains. This will help increase Ampol's earnings, support higher dividends and further strengthen their balance sheet.
Ampol is definitely one to watch for a material dividend increase in the coming year. It also has the potential to pay special dividends if margins stay elevated given its surplus franking credits. On the willingness side, the board led by Steven Gregg has a strong track record of returning capital to shareholders, they have paid two special dividends in the recent past.
Ampol currently trades on a fully franked trailing dividend yield of 3.0%.
Rounding off the list of income stocks we have…
Qube Holdings Ltd (ASX: QUB)
Solaris is optimistic on the outlook for this ASX 200 dividend stock following the recent Macquarie-led transaction to acquire interests in key port and logistics infrastructure.
"Qube Logistics is pending a material special dividend, which is particularly attractive for investors on lower tax rates," Casey said. "This is supported by surplus franking credits, and we have confidence in the board's willingness based on our direct engagement."
Casey concluded:
As shareholders prior to the approach from Macquarie, there was some uncertainty regarding UniSuper's intentions as they were aggressively buying shares on market. However, given the existing relationships between UniSuper and Macquarie on multiple other unlisted investments, we took the firm view that they were highly likely to support the deal.
