Due to recent events, the stock market is facing unprecedented volatility. Some analysts suggest that it's too early to start buying shares, others disagree. No-one can say for certain which direction stocks will go; these are investment ideas only and should not be taken as financial advice.
The major banks have traditionally been a safe bet when it comes to reliable dividend stocks, so with CBA, NAB, ANZ and Westpac in line to cancel or cut dividend payments this year, Aussie income investors will be keeping an eye out for alternative options.
Dividends are one of the most important considerations for Australian investors. Well-established blue-chip companies like the banks are less likely to see substantial price growth over many years so dividends are often seen as the key reason to invest in them.
But during a recession or crisis like COVID-19, many of these companies cut dividends to shore up capital, leaving those that rely on them scrambling. So we decided to find a list of non-bank stocks that analysts think might continue paying dividends through 2020.
How to pick the best dividend stocks
As you'll know, there's no "best stock". A stock that's great for one person could be a bad pick for you, so there are different ways to approach dividend stocks.
While dividend yield or dividend per share are key factors in stock picking, there's no saying whether the next five years will deliver the same results (or better or worse!).
Instead, Bell Direct's market analyst Jessica Amir said investors should note three key features when hunting for quality dividend stocks in 2020:
Low debt levels. You can check this in the company's profit results delivered twice a year or through its debt to equity ratio.
Repeated profits. Companies only pay dividends if they are profitable and the longer they've been doing so, the more likely they will this year.
Business as usual amid COVID-19. The company is continuing to operate or has seen an increase in activity.
Amir also advised investors not to get lured into "dividend traps" by assuming the same well-known dividend companies are the best value in 2020.
"Most successful investors and investment professionals stay nimble and reevaluate their holdings as the economy changes," said Amir.
"So if you are looking for dividends, be mindful that the big four banks' dividends will fall this year and remain uncertain after that, following the directive from APRA, combined with the largely uncertain economic environment."
20 dividend stocks to watch in 2020
Below is a list of dividend stocks sourced using Bell Direct's Strategy Builder tool. Bell Direct's market analyst Jessica Amir filtered for quality stocks that have repeatedly high earnings and low debt levels which might indicate continued or increased dividend payments in the future. These are not recommendations, they are intended as investment ideas only.
Debt to equity ratio: Compares a company's level of debt to its amount of shareholder equity. Generally speaking, the higher the ratio, the more leveraged a company is, although this ratio will differ broadly across sectors.
Price-earnings ratio: The relative value of a company's stock price to its recent profit results, i.e. the price investors are paying for every dollar of profit the company makes. A high P/E ratio might indicate investors expect growth to occur in the future and are willing to pay more for it, or it can also indicate the stock is overpriced.
Monash IVF is an Australian healthcare company offering reproductive and ultrasound services. It has primary operations in Australia, China and Malaysia.
Zimplats is a platinum miner with projects based in Zimbabwe. A mining company won't be everyone's cup of tea – they can be volatile and there are ethical considerations. However, Zimplats stands out as having a high dividend and low debt levels.
Fortescue Metals is a major Australian iron ore miner with operations in China and Australia. To date, it is the fourth largest iron ore producer in the world after BHP, Vale and Rio Tinto.
Schaffer Corp is a small-cap industrials company that produces building materials and automobile leather and interiors. In the last two decades, its share price has risen by more than 300%.
Alliance Aviation offers private aircraft charter flight services as well as aircraft sale and leasing. It operates in the tourism, government, corporate, sporting and entertainment sectors.
Capitol Health is an Australian health sector company that offers medical imaging services, including x-ray, ultrasound, mammography, nuclear medicine and bone density.
SG Fleet Group offers vehicle fleet leasing services including salary packaging for companies and organisations. It was founded in 1986 and is headquarted in Australia.
Codan is an Australian technology company that designs and manufactures communication and metal detection equipment used primarily in mining companies.
Gale Pacific is a global manufacturer of sun and weather protective materials and products such as umbrellas, turf, garden covers, mesh, window furnishings and screens.
Credit Corp is a major Australian financial services and debt collection company. It purchases and recovers debt and offers loans to impaired customers.
Money3 Corp is an Australian financial services company that offers small business and personal loans. In recent years it has made a name for itself thanks to its reliable annual dividend payment.
Although once known as a condom manufacturer, today Ansell develops and distributes protective gloves and equipment for industrial and healthcare industries, including surgical gloves, face masks, goggles and protective clothing.
Global manufacturing sector stock
Dividend yield: 2.4%
Price-earnings (P/E) ratio: 20.04
Debt to equity ratio: 0.01
15. Data3 Ltd (ASX:DTL)
Data#3 is an Australian tech company offering cloud technology services for companies in Australia and Asia Pacific. Its services include consultation, maintenance and project management.
MNF offers data, voice and cloud telecommunication services to Australian and global individuals and businesses. Its services are primarily used in mobile app communication such as video conferencing, texts and calls.
Ingenia Communities owns and develops retirement and lifestyle communities, including retirement villages, holiday parks and short-stay rental properties.
City Chic Collective is a women's clothing retail chain with stores located in Australia, New Zealand, the US and South Africa.
Retail trade and apparels sector stock
Dividend yield: 2.2%
Price-earnings (P/E) ratio: 23.4
Debt to equity ratio: 1.0
Buy shares through an online broker
To buy shares you'll need to find a broker. You can use the table below to compare online brokers (also known as share trading platforms) available in Australia.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Important: Share trading can be financially risky and the value of your investment can go down as well as up.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involve substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
Kylie Purcell is the investments editor at Finder. She has a background in business and finance news with previous roles at SBS, Your Money, TVNZ, Switzer Group and The Adviser magazine. Kylie has a Master in International Journalism and a Graduate Diploma in Economics. When she's not writing about the markets you can find her bingeing on coffee.
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