Top 5 ASX dividend shares for a COVID-19 recovery

If you’re betting on quicker-than-expected Australian share market recovery from COVID-19, chances are, you’ll be on the prowl for the top ASX dividend shares.

I can’t tell you for sure if we’ve seen the last of Coronavirus’ impact on Aussie stocks, but if you think we have, here are a few ideas to get the ball rolling on a dividend watchlist.

Before I get to the names, the following video comes from our education website and it explains exactly how Franking Credits work. Basically, they are tax credits attached to some dividend payments from Australian shares which boost the income received from dividend payments once a tax return is completed. You can use our free franking credits calculator (tip: bookmark the page) to calculate the value of dividend franked payments.

5 ASX dividend shares for a recovery

1. Washington H. Soul Pattinson & Co. Ltd (ASX: SOL)

ASX: API), which WHSP owns 19.3% of. WHSP invests in a large number of companies across a variety of industries such as construction, resources and telecommunications. "}" data-sheets-userformat="{"2":12798,"4":[null,2,16776960],"5":{"1":[{"1":2,"2":0,"5":[null,2,0]},{"1":0,"2":0,"3":3},{"1":1,"2":0,"4":1}]},"6":{"1":[{"1":2,"2":0,"5":[null,2,0]},{"1":0,"2":0,"3":3},{"1":1,"2":0,"4":1}]},"7":{"1":[{"1":2,"2":0,"5":[null,2,0]},{"1":0,"2":0,"3":3},{"1":1,"2":0,"4":1}]},"8":{"1":[{"1":2,"2":0,"5":[null,2,0]},{"1":0,"2":0,"3":3},{"1":1,"2":0,"4":1}]},"9":1,"10":1,"11":4,"15":"Raleway","16":6}" data-sheets-formula="=iferror(vlookup(R[0]C[2],R[21]C[-6]:R[574]C[-3],4,falsE),"EMPTY ABOUT SECTION!")">WHSP or “Soul Patts” is an investment house business that has been on the ASX for over a century. Its origins are in owning and operating Australian pharmacies, which is where the Soul Pattinson chemist chain comes from, however, that business is now owned by Australian Pharmaceutical Industries Ltd (ASX: API), which WHSP owns 19.3% of. WHSP invests in a large number of companies across a variety of industries such as construction, finance, resources and telecommunications. 

Soul Patts shares currently have a trailing dividend yield of 3.2%, or ~4.5% adjusting for franking credits.

2. Altium Limited (ASX: ALU)

Altium is an Australian multinational software business that was founded in 1985. It now has offices globally in places like San Diego, New York, Boston, Munich, Shanghai, Tokyo and Sydney. Its software focuses on electronics design systems for 3D PCB design and embedded system development. Its services include Altium Designer, Altium Vault, CircuitStudio, CircuitMaker, TASKING and Octopart.

While it’s known as a high growth tech stock — and it could be impacted in the short term by COVID-19 in the USA and Europe — Altium has plenty of cash on its balance sheet, no debt and a historical dividend yield of 1.5%. Not bad for a rapid-growth stock.

3. BHP Group Ltd (ASX: BHP)

BHP is a world-leading resources company, extracting and processing minerals (like iron ore and copper), oil and gas, and has more than 62,000 employees and contractors, primarily in Australia and the Americas. Headquartered in Melbourne, BHP has shares listed on both the ASX and London Stock Exchange (BHP Billiton Plc).

Although BHP did acknowledge potential COVID-19 impacts in China and elsewhere in its most recent report, it’s a relatively insulated ASX dividend share. Based on historical/trailing dividend payments BHP shares have a dividend yield of ~5.5%. Meaning, if it can keep its dividend payments intact BHP stands to pay a “grossed-up” payment (i.e. franking credits adjusted) of 7.8%.

4. Newcrest Mining Ltd (ASX: NCM)

If you’re not completely convinced about the recent stock market recovery, having some exposure to gold might not be such a bad thing. Newcrest is the largest gold producer listed on the Australian Securities Exchange and one of the world’s largest gold mining companies. As of 2020, its major operations in New South Wales’ Cadia Valley, Telfer in Western Australia, and Lihir in Papua New Guinea (PNG).

Currently, Newcrest shares have a trailing dividend yield of 1.2% fully franked (1.7% gross). If gold prices remain stable, production rises and it keeps a lid on costs, the dividend may improve.

5. 360 Capital REIT (ASX: TOT)

360 Capital Total Return Fund is an investment fund that invests across the entire real estate capital stack to take advantage of varying market conditions. The TOT fund’s strategy is focused on 4 key areas: direct real estate, indirect real estate, real estate debt and non-performing real estate debt.

Using historical figures, TOT’s dividend yield sits at 13%. Ordinarily, you would not be able to convince me to buy into a REIT’s dividend — especially with social distancing and the government regulating rental agreements. However, there a few three things worth noting about TOT:

  • it recently increased its share buyback to up to 20% of its shares
  • it’s on track to move its portfolio to 60% cash by June 30
  • it’s priced at 76% of its net assets, and
  • it recently confirmed its 2.25 cents per share/security quarterly dividend (note: the time to receive this dividend has now passed).

To reiterate this potentially favourable situation, 360 Capital Group’s Managing Director Tony Pitt recently authorised an ASX release which stated that TOT… “remains on track to increase to over $100 million by June 2020 (equivalent to $0.73 per security).”

Now that’s an interesting dividend stock worth investigating.

Disclosure: at the time of publishing, the author of this article owns shares of Altium.

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