The ASX share market is a great place to find opportunities with strong dividend yields thanks to a mixture of a generous dividend payout ratio and a cheap valuation.
Australian companies can provide investors with franking credits, giving investors an even stronger grossed-up dividend yield.
The highest dividend yield isn't necessarily the best one because a lot of higher yields may be in danger of a dividend reduction. However, the following two businesses offer extremely appealing dividend yields as well as a good track record of reliability.
Let's look at what makes them such compelling income stocks with huge dividend yields.
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Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop may be a relatively small retailer compared to names like Wesfarmers Ltd (ASX: WES) and Woolworths Group Ltd (ASX: WOW), but it has built a pleasing position in Australia's shaving industry.
It sells a variety of items including electric shavers, clippers, trimmers and wet shave items. The company also has product ranges across oral care, hair care, massage, air treatment and beauty categories.
There are few ASX shares as reliable as Shaver Shop for dividend income over the past decade. It started paying an annual dividend in 2017 and hasn't cut it once since. In fact, FY24 was the only year it didn't increase dividends.
Dividend growth isn't guaranteed every year, but the company is doing several things that could help grow earnings. It's adding more stores to its network, expanding its own brand (called Transform-U), agreeing to additional exclusive products with brands, benefiting from increased scale and working on its online presence.
Currently, its grossed-up dividend yield is 10.8%, including franking credits, which is extremely attractive in my view.
Hearts and Minds Investments Ltd (ASX: HM1)
Hearts & Minds is a listed investment company (LIC) that operates very differently to a typical LIC.
Instead of management fees or performance fees – which are non-existent for shareholders in this LIC – it donates money to Australian medical research each year.
How are the picks chosen? A majority of the portfolio is decided by a group of core portfolio managers, with those picks being quality businesses with good long-term prospects.
A minority of the portfolio is decided at an investment conference where experts pitch their best pick. The picks are diverse across sectors and geographically, which I think is a useful positive. All of the top picks are internationally-listed shares, giving investors different exposure to what you might get from an ASX share fund.
In my view, it's providing a very pleasing river of dividends. The company has built up a large profit reserve and committed to growing its dividend every six months by 0.5 cents per share.
That means, over the next 12 months, its two half-year dividends could amount to 20.5 cents per share. That translates into a likely grossed-up dividend yield of 10%, including franking credits.
