Dividend investing on the ASX remains one of the most reliable ways to build long-term wealth. Blue chip dividend stocks offer a combination of regular income and capital growth that is difficult to replicate through other strategies, particularly in an environment where interest rates are falling and term deposit returns are compressing. For income-focused investors, the ASX has historically been one of the highest-yielding developed markets in the world, and the franking credit system makes Australian dividends even more attractive on an after-tax basis.
We focus on companies with sustainable payout ratios, strong free cash flow generation, and a track record of maintaining or growing their dividends through economic cycles. A high yield on its own is not enough. The dividend needs to be backed by a business that can support it through downturns and continue growing it over time. We also look for catalysts that could drive earnings higher, because a growing dividend is ultimately more valuable than a static one.
The five stocks below represent our current best ideas for dividend income on the ASX. Each has been through a full research process covering financials, competitive positioning, payout sustainability, and valuation. We update this page regularly as new research is published.
Last updated 14 April 2026.
| Stock | Rating | Price Target | Div Yield | Why We Like It |
| Metcash (ASX: MTS) | Buy | A$3.80 | 5.8% | Trough earnings with hardware cycle recovery ahead, yield rising to 7.4% by FY28 |
| Deterra Royalties (ASX: DRR) | Neutral | A$4.50 | ~5% | Pure-play mining royalty with 90%+ EBITDA margins, no operating costs, lithium optionality |
| IAG (ASX: IAG) | Neutral | A$8.00 | 4.8% | Defensive earnings from essential insurance, $200m buyback, yield growing to 5.3% by FY28 |
| Suncorp (ASX: SUN) | Buy | A$20.00 | 4.4% | Pure-play insurer with $700m excess capital, 22.5% upside, yield growing to 5.9% by FY28 |
| Telstra (ASX: TLS) | Buy | A$5.25 | ~4.3% | Infrastructure moat with growing dividend, A$750m buyback, defensive earnings |
Our Top 5 Dividend Stocks To Buy on the ASX
Metcash Ltd (ASX: MTS)
Buy, 12-month price target A$3.80, FY26E dividend yield 5.8%. Price target and upside based on prices at time of publication.
Metcash is Australia’s leading wholesale distributor operating across food, hardware and liquor. The food division supplies the IGA network, hardware encompasses IHG, Mitre 10 and Total Tools, and the liquor arm operates through brands including Cellarbrations and IGA Liquor. The company is currently trading at a 28% PE discount to the ASX200, which we think significantly overstates the risk here given that earnings are sitting at a cyclical trough rather than reflecting any structural deterioration in the business.
The dividend story is compelling. A 5.8% yield on a 70% payout ratio provides meaningful income while investors wait for the hardware cycle to turn. As earnings recover through the hardware division, we expect the yield to grow to 7.4% by FY28 on our estimates. The hardware division is running at depressed margins of 3.7% versus a mid-cycle level of 6% or higher, which implies significant operating leverage as volumes recover with rate cuts anticipated from early 2027.
We think Metcash offers the best combination of current yield and dividend growth potential on this list. Read the full article on Metcash here.
Deterra Royalties Ltd (ASX: DRR)
Neutral, 12-month price target A$4.50, FY26E dividend yield ~5%. Price target and upside based on prices at time of publication.
Deterra Royalties is Australia’s largest pure-play mining royalty company. The centrepiece of the business is the Mining Area C (MAC) royalty over BHP’s iron ore operations in the Pilbara, which generates a revenue stream with no associated operating costs. The royalty model delivers EBITDA margins above 90%, making Deterra one of the highest-margin businesses on the ASX. A 75% payout ratio and a dividend yield of roughly 5% on FY26 estimates make this a strong income proposition.
What sets Deterra apart from a traditional mining stock is the absence of operating risk. There is no mine to run, no workforce to manage and no capital expenditure cycle to navigate. The cash simply flows in as BHP produces iron ore. Beyond the MAC royalty, Deterra holds a royalty over the Thacker Pass lithium project in Nevada, which provides meaningful optionality on long-term lithium demand without requiring any capital from Deterra to develop. The Neutral rating reflects fair valuation at current levels, but for income investors the combination of high margins, no operating costs and a reliable dividend makes this a compelling holding.
We think Deterra suits investors who want iron ore exposure without the operational complexity of a traditional miner. Read the full article on Deterra Royalties here.
Insurance Australia Group Ltd (ASX: IAG)
Neutral, 12-month price target A$8.00, FY26E dividend yield 4.8%. Price target and upside based on prices at time of publication.
Insurance Australia Group is Australia’s largest general insurer, operating household brands including NRMA, CGU and SGIO. The business generates defensive earnings from essential insurance products that consumers and businesses need regardless of the economic cycle. A 4.8% dividend yield in FY26 is expected to grow to 5.3% by FY28 as margins recover and the $200 million buyback reduces the share count.
The near-term outlook is mixed, which is reflected in the Neutral rating. The integration of RACQ is creating a temporary drag on margins, and the 1H26 result came in below expectations. However, the underlying business is well positioned for margin recovery as integration costs roll off and premium rate increases flow through the book. For income investors, IAG offers the kind of defensive, steady-state earnings profile that tends to hold up well through economic volatility.
We think IAG is a solid income holding for investors who value defensive earnings and a growing dividend, even if the near-term upside to the price target is limited. Read the full article on IAG here.
Suncorp Group Ltd (ASX: SUN)
Buy, 12-month price target A$20.00, FY26E dividend yield 4.4%. Price target and upside based on prices at time of publication.
Suncorp is now a pure-play insurer following the sale of its banking arm, operating well-known brands including AAMI, GIO, Apia and Vero. The company is returning significant capital to shareholders through a $400 million buyback program and holds $700 million in excess capital above regulatory requirements. A conservative 60-80% payout ratio target means there is room for meaningful dividend growth, and we expect the yield to rise from 4.4% in FY26 to 5.9% by FY28.
The investment case goes beyond just income. The 12-month price target of A$20.00 implies 22.5% upside, which makes Suncorp one of the few stocks on the ASX offering both a compelling yield and significant capital appreciation potential. Strong unit growth in Home and Motor lines is supporting top-line momentum, and the simplified pure-play structure allows management to focus entirely on underwriting discipline and operational efficiency.
We rate Suncorp as a Buy and think it is the strongest all-round opportunity on this list when combining income, growth and capital returns. Read the full article on Suncorp here.
Telstra Group Ltd (ASX: TLS)
Buy, 12-month price target A$5.25, dividend yield ~4.3%. Price target and upside based on prices at time of publication.
Telstra is Australia’s dominant telecommunications provider with an infrastructure moat that is extremely difficult to replicate. The company’s mobile network, fibre assets and data centre operations underpin defensive earnings from essential connectivity services that consumers and businesses rely on every day. A dividend yield of roughly 4.3% is complemented by a growing dividend and an A$750 million buyback program that further supports shareholder returns.
The growth outlook is anchored by mobile, where Telstra continues to benefit from rational industry pricing and a leading market share position. The company is addressing NBN subscriber declines with competitive internet-only plans and cost discipline across the group is supporting margin expansion. While Telstra will never be a high-growth name, the combination of a reliable and growing dividend, infrastructure-grade assets and strong free cash flow makes it one of the best defensive income stocks on the ASX.
We rate Telstra as a Buy for investors seeking reliable income with modest capital growth potential from a business that has genuine pricing power and competitive advantages. Read the full article on Telstra here.
How We Select Dividend Stocks
Our process for selecting the best dividend stocks on the ASX goes beyond simply screening for the highest yields. We evaluate each company across several dimensions including payout ratio sustainability, free cash flow coverage, balance sheet strength, and the trajectory of future earnings growth. A high yield that is funded by debt or declining earnings is not a genuine income opportunity, so we focus on businesses where the dividend is backed by real cash generation.
We also consider the total return picture. A stock yielding 4% with 20% upside to our price target will often be more attractive than one yielding 6% with limited capital growth potential. Each stock on this list has been through a full research process that includes detailed financial modelling, industry analysis and management assessment. We update the page as new research is published or when material changes occur to any of the investment cases.
If you would like to discuss any of these names or how they might fit within your portfolio, request a callback or call us on 1300 889 603.
