Are these the best ASX dividend stocks in 2023?

Key highlights:

• Australian shares are expected to pay out record dividends in FY2023.
• The top ASX dividend stocks are led by companies in the resources sector.
• High dividend stocks on the ASX are usually determined by a company's financials.

What are the best dividend stocks for investors?

Well it's a complicated question, but the first thing to answer is what exactly are dividends. Dividends are cash payouts to investors funded by the company’s long-term cash flow and the profits they make each year. Last year in FY22, ASX 200 shares announced dividends totalling $42.3 billion, down 1.7% year over year. The most common form of a dividend is a cash payment, but there are other ways a company can return profits to shareholders.

Dividend stock investors view a stock’s yield as the key measure of a stock’s value. It offers an insight into how great the return on an investment will be. Remember that past performance is no guarantee of future performance and you should consider your personal circumstances before investing. With that said, these are some of the top ASX dividend stocks.

Top dividend stocks on ASX

*The list of stocks mentioned are ranked by market capitalisation.

Data as of 30 March 2023

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Discover the top 10 dividend stocks in Australia

1. BHP Group Limited ($BHP)

Market Capitalisation: $233.38b

Stock price (as of 30/03/2023): $46.06

Dividend yield: 8.50%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 78% / 22%

BHP is one of the best long term stocks to watch on the ASX. Earlier in March it paid out a huge US$0.90 per share dividend. This brings its twelve months trailing dividend yield to 8.50%. BHP paid out a total of US$4.6b in its first half dividend payment, which is decent but would require a much higher dividend payment in the second half to match last year's record dividends of US$36b.

While BHP states that its first half had solid operating results, broker house Goldman Sachs says it is likely though that the company will cut its dividend payouts in the future. Goldman anticipates a payout of US$2.64 FY23. The current high iron ore prices are not expected to last, says Goldman, which would see BHP's revenue decline.

If you're interested in the mining giant, learn how to buy BHP Group shares.

2. Rio Tinto Limited ($RIO)

Market Capitalisation: $43.57b

Stock price (as of 30/03/2023): $117.37

Dividend yield: 8.92%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 56% / 44%

Last month in February, Rio Tinto announced a final dividend of US$2.25 per share, bringing the full-year dividend to US$4.92 per share. While the final dividend was a decrease from its interim dividend of US$2.67, it is important to note that its interim dividend was the second-highest ever doled out by an iron ore company.

The combined dividend total brings the annual dividend yield to 8.92%, and will see it pay out roughly US$8b in dividends for the entire year.

What could RIO look like in the future? Goldman Sachs believes that the company will be paying out slightly higher dividends in the next two years, before slowing down in FY2025. The next forecasted dividends are US$5.33 per share in FY2023, US$5.98 in FY2024, and US$3.40 in FY2025.

🆚 Compare RIO vs BHP→

3. Telstra Corporation Limited ($TLS)

Market Capitalisation: $48.7b

Stock price (as of 30/03/2023): $4.20

Dividend yield: 5.93%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 57% / 43%

It's not just Australia's resource sector that pays dividends, but the broader market does as well. Telecommunications giant Telstra (TLS) is known to pay stable dividends, never having missed a year since 1998. The company pays out dividends semi-annually, adding in some special dividends when it performs well.

Telstra's most recent semi-annual dividend was paid out in March, with a TTM-yield of 3.79%. That offering incorporated a fully-franked A$0.085 dividend, beating consensus analyst estimates.

Looking forward, analysts are forecasting a final dividend of also A$0.085 – totalling A$0.17 over the financial year – which Telstra generally pays out on September. Dividend amounts are expected to increase in the next few years, with a total payment of A$0.18 forecasted for FY2024, and A$0.19 for both FY2025 and FY2026.

4. Macquarie Group Limited ($MQG)

Market Capitalisation: $67.79b

Stock price (as of 30/03/2023): $171.77

Dividend yield: 3.71%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 66% / 34%

The banking sector's stocks are popular equities in Australian investment portfolios, particularly for those seeking long-term value. The bigger banks often attract investors, and amongst them Macquarie Group (MQG) stands out as one of the best dividends stocks on ASX. Macquarie Bank is also a major benefactor of the current financial situation in Australia. As interest rates continue to rise investors are looking for conservative investments and have been favouring Macquarie Group. This is due in part to its asset management division which separates it from the other big four.

Macquarie Group has a long history of having paid out dividends, rewarding investors with its first one in 1996. Since then, the company has only cut dividends twice, and has not skipped a year since 2005. In the last few years, Macquarie has paid dividends out semi-annually on the months of July and December.

Macquarie's most recent dividend in December 2022 paid out A$3.00 per share, which brought its dividend yield to approximately 3.66%. This was a decent increase in contrast to its December 2021 dividend of A$2.72 per share. The company's dividends are generally only 40% franked, and July's dividends tend to be higher than December's. It is estimated that FY2023 full-year dividend totals to A$6.83, which means that analysts expect July's dividend to be at around A$3.83.

5. New Hope Corporation Limited ($NHC)

Market Capitalisation: $4.99b

Stock price (as of 30/03/2023): $5.55

Dividend yield: 15.19%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 62% / 38%

Another one in the resource sector, New Hope Corporation (NHC) explores, develops, produces, and processes coal, oil and gas properties. The company owns interests in two open cut mines in Queensland and New South Wales and has one of the best yields of the last 12 months. Similar to most companies on this list, NHC has distributed dividends for several years. However, there is no visible trend of growth nor decline in its dividends – most likely showing that the company just distributes amounts based on its income for the year.

The coal giant pays out dividends semi-annually in the months of May and November. It has recently-announced dividend of A$0.30 per share, plus an additional special dividend of A$0.10 per share. The ex-dividend date of this payment is the 17th of April, with payment date to be on the 3rd of May. NHC's dividend amounts have grown strongly since 2021, most likely driven by higher coal, gas and oil prices.

With a dividend yield of 15.19%, NHC is one of the highest-paying dividend companies in the ASX. Analysts however do not think that this yield is particularly sustainable – with dividend estimates slowly going down over the next few years.

6. Whitehaven Coal Limited ($WHC)

Market Capitalisation: $5.95b

Stock price (as of 30/03/2023): $6.67

Dividend yield: 10.75%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 67% / 33%

Similar to the above company, Whitehaven Coal is another company in the energy sector. Over the last financial year, WHC, which develops and operates coal mines throughout Queensland and New South Wales, has reported record numbers across key metrics.

Whitehaven's revenue has allowed for substantial dividend growth. Its most recent dividend, which was a semi-annual dividend paid in March, was recorded at A$0.32 per share – the highest interim dividend ever paid by the company since its first payout in 2008. Similarly, the company's full-year FY2022 payout was the largest in the company's history, where shareholders received cash payment of A$0.48 per share.

Based on its recent closing price, the company has a trailing dividend yield of 10.42%, another really high yield in this list. Analysts forecast this FY2023's dividends to total to A$0.69 for the year, before going up to A$0.77 in FY2024. Based on the latest Whitehaven Coal share price of $6.67, this will mean yields of 10.34% and 11.5%, respectively.

7. Suncorp Group Limited ($SUN)

Market Capitalisation: $15.33b

Stock price (as of 30/03/2023): $12.06

Dividend yield: 6.02%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 54% / 46%

Suncorp (SUN) is one of Australia's leading general insurance and banking companies. There are changes a-foot though, with the company in the process of selling its banking arm for A$4.9b to Australian and New Zealand Banking Group (ANZ). But the insurance arm continues to be strong, with the group owning the likes of AAMI, GIO and Vero.

In the past, the company was known as one of the best Australian dividend stocks due to its extremely long history of dividend payments since 1989. Unfortunately, this has dropped with recent performances. In FY22, the company reported an increase in revenue but that was not enough to stop the 24% slide in net profits.

Suncorp's most recent dividend was paid out in March at A$0.33 per share, a substantial increase from its March 2022 dividend of A$0.23. With the latest payment, the TTM dividend yield is recorded at 6.02%.

While the company had struggled in the recent years, analysts are upbeat about Suncorp's future. The concensus forecast is for the dividend yield to grow over the next three years.

8. Harvey Norman Holdings Ltd ($HVN)

Market Capitalisation: $4.47b

Stock price (as of 30/03/2023): $3.59

Dividend yield: 10.45%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 75% / 25%

Retail giant Harvey Norman (HVN) is also an investor darling for those seeking passive income from dividends, having paid them out every year since 1992. The company's share price rocketed during the pandemic, but has had a rough couple of years post-pandemic due to less foot-traffic in its stores.

The company pays semi-annually on May and November of each year, and has done so since its very first dividend payment. Its latest interim dividend is recorded at A$0.13, to be paid out on the 1st of May. Unfortunately, the distribution is lower than its last two years of interim dividends, which were both at A$0.20 per share. Despite that however, the company's dividend yield is at 10.45% – a pretty good number compared to most other companies.

Analysts estimate Harvey Norman's final dividend for the year to be at A$0.15 per share. Looking forward, it is expected that the company will have a lower dividend for FT2024, before finally trending higher in the subsequent years.

9. Fortescue Metals Group Ltd ($FMG)

Market Capitalisation: $69.24b

Stock price (as of 30/03/2023): $21.61

Dividend yield: 8.71%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 58% / 42%

Fortescue Metals Group (FMG) needs no introduction as one of the biggest commodity companies on the ASX. It deals only with iron ore, leaving it susceptible to changes in the price of the commodity. This is what happened in its last full-year financial results. The company reported record annual shipments of 189m tonnes but revenue fell 22% due to a reduction in the price of iron ore.

Still, the miner was committed to a higher dividend payout, with investors receiving a total dividend of A$2.07 per share in FY22. Despite the stellar performance over the last few years, it's latest dividend paid out just last March was recorded at just A$0.75 per share, and analysts estimate the final dividend of the year to be A$0.48, bringing the year's total to A$1.18 – almost half of FY2022's dividend.

Unfortunately for investors, there is still concern around the future performance of the miner due to Chairman Andrew Forrests' $9b green plan. The plan has raised concerns about the impact on dividends, with multiple analysts downgrading plans. Dividends are expected to continue going down in the next few years.

Want to invest in FMG? Learn how to buy Fortescue Metals Group shares

10. Commonwealth Bank of Australia ($CBA)

Market Capitalisation: $166.00b

Stock price (as of 30/03/2023): $94.00

Dividend yield: 4.27%

Stake Platform Bought / Sold (1 Jan 2023 - 29 March 2023): 76% / 24%

Commonwealth Bank is one of the largest stocks to watch by market capitalisation. Why? Well the nation's largest bank has had an impressive history of share price growth, rising from $5.40 to now sitting at over $90 (at time of writing).

Investors have not only enjoyed the CBA stock price rise, but also the yield rise. The bank hasn't missed a bi-annual dividend payout in its 31-year history but of course the payment amounts of these have fluctuated.

Most recently the bank declared an interim dividend of A$2.10 – the same amount with its final dividend in FY2022. This TTM dividend means a yield of 4.27%. The bank says it is continuing to target a payout ratio of between 70% to 80% of cash net profits.

Consensus analyst estimates point to a final dividend of A$2.30 for FY2023, bringing the year's total to A$4.40. Additionally, analysts only expect CBA's dividend to continue growing over the next few years.

🆚 Which bank is performing better: CBA vs ANZ→

Key dividend dates

For most investors the key date to watch is the declaration date. This is the day you find out how much the company is set to pay out. This date usually coincides with the release of a company's financials, so with its half-yearly or annual results. The ASX release will contain the amount to be paid per share and the level of franking. It will also state the ex-dividend date, record date and payment date.

The ex-dividend date is the first trading day upon which an upcoming dividend is not included in a share's price. If you buy before this date, you get the payout. If you buy after, you won't. The record date is the day the company makes a list of all its shareholders to allocate dividend payments.

Long term dividend FAQs

How to find a strong long term dividend stock?

The key to finding strong ASX stocks lies in the evaluation of the company, however many investors have their own way of evaluating a stock. But for dividend investors, three important metrics can help you choose a dividend stock for your portfolio: dividend yield, dividend payout growth rate, and dividend payout ratio.

The dividend yield is a ratio expressed as a percentage that shows how much a company pays in dividends relative to its share price. The payout growth rate is the average percentage rate of growth a stock's dividend has experienced over a specific period. Finally, look at the dividend payout ratio, or the percentage of a company's earnings or free cash flow used to cover dividend payments.

Check out our guide on the top Australian shares for long term if you aren't focused on pure dividend stocks.

How to calculate dividend yield?

In simple terms, the yield is calculated by adding up all payouts in the last 12 months (including special dividends), and then dividing the value by the current share price. Yields for a current year can be estimated using the previous year's dividend or by multiplying the latest quarterly dividend by 4, then dividing by the current share price.

The yield is used to measure the amount of cash flow you're getting back for each dollar you invest in an equity position. So essentially it's the return on investment for a stock without any capital gains.

Should I be worried about the companies with a high dividend yield?

A company only has a finite amount of money. So if they are paying out investors, that gives them less money to invest in themselves to make capital gains. So yes, a high dividend could be costing a company its growth potential.

It pays to do some research, sometimes a high yield could be a result of a stock price tanking, which would make the yield mathematically rise. Like any investment, you should consider your personal circumstances and if in doubt, seek advice from a licensed financial adviser.

What long term dividend ETFs on the ASX are there?

There are, of course, ways for investors to access dividend stocks without putting all their eggs in one basket. There are a number of ASX ETFs in the market that offer dividend payouts. For a larger list, check out the top dividend ETFs in Australia.

BetaShares has two such products, the Australian Financials Sector ETF (ASX:QFN), Australian Top 20 Equity Yield Maximiser Fund (managed fund) (ASX:YMAX). QFN comprises the largest ASX-listed companies in the financial sector while YMAX tracks 20 of the largest blue-chip stocks on the ASX.

There are a number of Vanguard ETFs available to investors looking for access to ASX stocks. The Australian Shares High Yield ETF (ASX:VHY) seeks to track the return of the FTSE Australia High Dividend Yield Index. The ETF provides exposure to companies listed on the ASX that have higher forecast dividends relative to other ASX-listed companies.

The companies these ETFs invest in can be found in their product disclosure statements.

This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial or taxation advice before investing.