5 Best Dividend Stocks to Buy [ASX Blue Chip Stocks 2021]

Henry Fung

Henry is a co-founder of MF & Co. Asset Management with over 15 years of experience as a trader, investor and asset manager. Henry runs the Options Income Strategy and has a free 5-day options income strategy course you can take to learn how to use options to generate income.

October 29, 2021

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.

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.

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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.

Fortescue Metals (ASX:FMG)

Fortescue Metals Group (ASX:FMG)

Fortescue Metals Group (ASX:FMG), led by Andrew Forrest, Australia’s richest man, is the world’s fourth-largest iron ore producer.

The company reported a record FY2021 as it took full advantage of high iron ore prices with a low-cost structure from its integrated operations, and the timely completion of a new mine.

Fortescue has underperformed the ASX 200 severely after July.

However, we see this as an opportunity to buy a quality stock at a low price with an incredible dividend of over 25%.

Even if Fortescue decide to halve the dividend, we are still looking at a yield of more than 12% which is far superior to what BHP and RIO can offer.

Read the full article about why Fortescue Metals (ASX:FMG) is one of the best dividend stocks to buy on the ASX.

ADBRI (ASX:ABC)

Adbri Limited (ASX ABC)

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.

Read our research on ADBRI (ASX:ABC) on why we think it’s one of the best dividend stocks to buy on the ASX. 

Bank of Queensland (ASX:BOQ)

AUSTRALIA-BANKING-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.

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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.

Read more about why we think Bank of Queensland (ASX:BOQ) is one of the best dividend stocks on the ASX. 

BHP (ASX:BHP)

BHP (ASX: BHP)

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.

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Read our research on BHP (ASX:BHP) on why we think it’s one of the best dividend stocks to buy on the ASX. 

Coles (ASX:COL)

Coles Group (ASX:COL)

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.

Read the full article on why we think Coles (ASX:COL) is one of the best dividend stocks to buy on the ASX.

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:DTR)

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%.

Click here for the full article on Deterra Royalties (ASX:DRR) and why we think it’s one of the best dividend stocks to buy.

Are you still looking for the best stocks to buy in 2021? We’ve put together a free report on 5 stocks that we think are the best buys on the ASX right now. Download it instantly here.

This is general advice only. MF & Co Asset Management has not considered your personal financial needs, objectives or current situation. This information is not an offer, solicitation, or a recommendation for any financial product unless expressly stated. You should seek professional investment advice before making any investment decision.

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