Today, we’ll look at some blue chip stocks which are some of the best dividend stocks to buy on the ASX for 2021.
Most of these shares are already mature stocks with stable revenue and paying good dividends.
As defensive stocks, value stocks are considered a safe harbour for assets as strong established businesses are expected to weather any oncoming storms.
In addition, any rise in interest rates from inflation fears will see value stocks perform well as investors rotate out from growth stocks into value stocks.
There are three reasons for this:
- growth stocks love low yields, which gives them a higher future value;
- value stocks love higher yields and inflation as value stocks tend to be price setters;
- investors look for dividend yield to beat inflation.
Even though COVID-19 has disrupted pretty much all of these companies, these are all strong resilient blue chip stocks that are poised to bounce back, if not already.
Some of these stocks don’t have a great yield right now.
This is the symptom of low interest rates – when banks are paying basically nothing on deposits, investors are accepting lower dividend yields and driving up stock prices.
However, what is more important is that these blue chip stocks all have strong growing dividends and the yields will rise over time.
If you are looking to buy Australian blue chip stocks for the long-term and looking for a strong stable dividend yield, these are some of the best dividend stocks to buy on the ASX for 2021.
If you are looking for higher growth shares, you can check out our list of 5 best growth shares here.
For higher risk, we have a list of 5 best penny stocks that have good potential.
Table of Contents
- 1 Best Dividend Stocks on the ASX with a Good Yield
- 2 Bonus Stock: Best Dividend Stocks on the ASX with Growing Dividends
Best Dividend Stocks To Buy Now
The hardest part when it comes to dividend investing is to uncover shares that have the strongest most predictable revenue lines and are market leaders in their field.
Without a doubt, some of these best dividend-paying stocks will be familiar names to you and form the bedrock of many Australian stock portfolios.
Our Research team has been hard at work finding the best dividend stocks to buy now in Australia for dividend investing.
I’ve outlined 5 stocks that we feel represent some of the best dividend stocks in the Australian market.
Best Dividend Stocks on the ASX with a Good Yield
These blue chip stocks currently have a good yield and good yield growth prospects.
ADBRI LIMITED (ASX:ABC) is one of Australia’s largest core sector companies.
The company is involved in the production of inputs for sectors including construction, mining, and infrastructure.
After weathering a very rocky 2020 due to the effects of the pandemic on its business, ADBRI is currently depressed due to the spread of the delta variant of the virus.
However, we believe that the stock is a solid buy given the potential of the company’s businesses amidst infrastructure spending and mining for metals required in climate-related electrification.
Bank of Queensland (ASX:BOQ)
Bank of Queensland (ASX:BOQ) is one of Australia’s largest financial institutions.
The banking sector has been one of Australia’s best-performing sectors over the past few months because of a number of factors.
The reversal of COVID loan provisions created last year, a booming housing market, and better credit growth due to economic recovery from the pandemic have all being strong tailwinds.
Meanwhile, the ghosts of the Royal Commission inquiry into the sector appear to have been laid to rest, and the bigger, now “cash-jammed” banks, e.g. Commonwealth Bank of Australia (ASX: CBA), have started announcing record buybacks and dividend payouts.
The Bank of Queensland (ASX:BOQ) acquired ME Bank earlier this year in a smart move claimed to create a meaningful alternative to the big banks.
We believe the BOQ share price has strong upside potential because of sector tailwinds and the bank’s own efforts to transform its business.
BOQ is currently yielding at about 3% which is on par with the average sector yield.
BHP is an Australia-headquartered mineral and petroleum conglomerate.
The company has operations in iron ore, coal, copper, nickel, crude oil, and gas.
The company’s operations span 20 countries and five continents. Mining operations are concentrated in Australia and the Americas while oil and gas activities are mostly based in the US, Trinidad, the UK, Algeria, and Australia.
In 2020, the stock was under pressure from the pandemic and the sharp deterioration in Australia’s relationship with China, its largest trading partner.
However, BHP shares witnessed a swift reversal of fortunes based on hopes of a global recovery from the pandemic.
That, and a rally in commodities with an accompanying hawkish global inflationary scenario has pushed the stock past its pre-GFC and pre-pandemic levels into an uncharted, all-time high zone.
The stock was up as much as 21% year-to-date at one point, but labour issues and climate-related events in China have triggered a correction.
However, we believe commodities are in the early stage of a long-term upcycle, and BHP shares will benefit from the trend.
At the current BHP share price, BHP shares are currently yielding 4.77% which is exceptional in the current environment.
Additionally, Goldman Sachs has projected dividend yields of 7.3%, 7.5%, and 6.3% during 2021-23, which are substantial by any standard.
Origin Energy (ASX:ORG)
Origin Energy (ASX ORG) is a leading integrated energy company and Australia’s largest energy retailer by revenue size and customer accounts.
With a new technology acquisition in play, Origin plans to improve its customer experience and reduce costs with a new highly automated platform called Kraken.
With this new platform and reduced costs, Origin could see growth in their EPS and dividends in the near future.
As a utility, Origin is a good and steady dividend play with growth potential that can add a dependable ballast to a portfolio.
Origin has recently reinstated its dividend and the board will continue to target a payout ratio of 30 to 50% of free cash flow per annum in the future.
Origin currently yields about 5.41%, fairly high in the current environment when not even banks are yielding more than 4%.
Coles Group (ASX:COL) is an Australian retail chain operator.
The company has built a solid reputation for itself as a consistent dividend-paying and defensive stock.
Coles shares fared reasonably well throughout COVID.
Despite suffering a 1.7% drop in revenue and a 32% drop in profits in FY20 it remained profitable and honoured shareholders’ expectations of dividend payments.
The company has made good progress through FY21, but COVID concerns in Australia prevented that progress from being translated into significantly higher returns.
However, we believe the company is a good post-COVID dividend and defensive play.
The company is also a significantly better buy than Woolworths on a valuation basis.
Bonus Stock: Best Dividend Stocks on the ASX with Growing Dividends
These blue chip stocks currently have a relatively low dividend yield but have strong dividend growth. You should expect the yield to catch up in the near future.
Deterra Royalties (ASX:DRR)
Deterra Royalties (ASX:DRR), the largest ASX-listed resources-focused royalty company, is the result of a demerger in 2020 from Iluka Resources, Australia’s biggest mineral sands company.
The company earns mining royalties from its flagship Mining Area C (MAC), the site of BHP’s North Flank and new South Flank project.
Listed royalty companies such as Deterra provide investors with exposure to the value from a natural resources business, but without much of the exposure to some of the operating risks of their mining.
The demerger was fortuitously timed considering the recent rally in ore prices and the inauguration of BHP’s South Flank at the company’s flagship Mining Area C (MAC).
The latter will cause a sizeable jump in royalty flows to Deterra.
Once MAC ramps up to its expected output by FY23, DRR at the current share price will have a forecasted PE of 12.5x and a dividend yield of 5.3%.