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Top 10 ASX dividend stocks to watch in March 2023

Stocks yielding a reasonable dividend often make solid additions to the portfolio. These 10 dividend stocks offer differing investment themes to suit different portfolios or investment aims.

Australian Dollars Source: Bloomberg

The RBA continues to raise interest rates while food and energy prices continue to rise, driving inflation. The household saving ratio has fallen five quarters in a row at the same time household spending rose five quarters in a row. This is unsustainable.

The general consensus amongst economists is that Australia’s economy will slow down during 2023 and may go into recession late in the year or in 2024.

Generally, investors like to position themselves defensively ahead of a slowdown. Sectors less affected include utilities, consumer staples, energy and infrastructure.

Dividend stocks don’t generally fare well in a rising interest rate environment – nor do growth stocks for that matter. This creates an opportunity to rebalance the portfolio taking advantage of lower prices and dividend stocks that may surprise on the upside.

Ten defensive dividend stocks to watch in March 2023

The stocks are summarised below as of 8 March 2023.



1. Woolworths

2.5% Retail food

2. Transurban

3.8% Toll roads

3. Santos

4.7% Natural gas

4. Brambles



5. Sonic Healthcare

3.2% Medical diagnostic services

6. Ampol

7.1% Petroleum products

7. Medibank Private

3.8% Health insurance

8. Mercury NZ

2.7% Green energy

9. Whitehaven Coal

9.9% Coal

10. Elders

6.1% Agricultural services

1. Woolworths

Woolworths is one of the leading supermarket chains in Australia and New Zealand. The company operates1,087 Woolworths supermarkets and Metro Food stores in Australia and 190 countdown supermarkets in New Zealand. It also operates 176 Big W discount merchandise stores.

Keeping costs low is key to profits at the generally lower-priced end of the food retail business. To this end, Woolworths has halfway through a supply chain transformation that has added seven distribution centres since 2019 and will add four more over the next three years.

Woolworths has grown its sales consistently over the past four years, with 1H2023 sales up 4% over 1H2022 and an average of 7.5% since 1H2020.

The stock is yielding a rather unexciting 2.5%. However the continued improvement and reweighting of portfolios could see the shares continue to gain on the 12% so far this year.

2. Transurban Group

Transurban is a toll road development and holding company. It operates 21 toll roads in Sydney, Melbourne, Brisbane, the Greater Washington area, and Montreal. Toll roads are an extremely boring business that earns very predictable revenues.

One thing that stands out about Transurban, however, is that it is protected against inflation – and may even benefit from it. As of 31 December 2022, 68% of Transurban’s revenue was indexed with CPI and 27% escalated automatically at 4.24%. Transurban benefits because the main drivers of inflation – housing, recreation, food and beverages and household equipment – have no impact on Transurban’s cost base.

Transurban shares yield 3.8% as of 8 March.

3. Santos Ltd

Santos explores, develops, produces and transports natural gas and liquids in Australia, PNG and Timor, and has an oil development asset in Alaska.

Santos is a natural gas play with 88% of its reserves being natural gas and natural gas liquids. Around 25% of its reserves are onshore Australia, where they are benefiting from high gas prices. The rest are offshore Australia and Papua New Guinea and are destined to be sold as Liquefied Natural Gas (LNG). LNG prices have remained elevated since the Nord Stream pipelines from Russia to Germany were blown up.

As of 8 March, Santos was trading at a 4.7% yield.

4. Brambles Ltd

Brambles is better known as CHEP – the company that owns the iconic blue pallets. Originally just a pallet company, Brambles operates as a supply chain logistics company focusing on the management of pallets, crates and containers.

Brambles operates through CHEP North America and South America, Chep Europe, Middle East, Africa and India and CHEP Australia.

Even as the economy slows, management of pallets, crates and containers remains an essential service.

Even during the supply chain problems of the pandemic, Brambles improved its revenue each year from $4.6 billion in 2019 to $5.6 billion in 2022.

As of 8 March, Brambles was trading at a 2.6% yield.

5. Sonic Healthcare

Sonic Healthcare offers medical diagnostic serves to doctors and hospitals in Australia, New Zealand, the UK, Europe, the US and elsewhere. The company also offers primary care medical services making up 5% of its revenue,

As a diagnostic company, Sonic Benefited from all the testing conducted during Covid, however its base (non-Covid) business has been steady, rising by 9% for 1H2023 compared to 1H2020.

This sort of steady rise is an attractive attribute when the economy is slowing down. And as a medical diagnostic company, it seems fairly recession-proof – people get sick in every economic environment.

As of 8 March, Sonic was trading at a 3.2% yield.

Source: Bloomberg

6. Ampol

Ampol imports, refines and distributes petroleum products in Australia and New Zealand. As the operator of one of Australia’s two remaining refineries (down from 20 in 2000), Ampol has been the beneficiary of subsidies from the federal government which is concerned about energy security.

In addition, with the closures of ExxonMobil’s Altona Refinery in 2020 and BP’s Kwinana Oil Refinery in 2021, there appears to be less domestic competition.

Ampol’s refining margins hit a record USD33 per barrel in 2Q 2022, up nearly five-fold from 2Q 2021.

The outlook for Ampol seems positive given that over half of the company’s sales by volume come from diesel fuel, and according to the Department of Energy’s most recent report, diesel fuels sales hit a record 2.8 billion litres in November 2022.

Ampol’s forward yield is a solid 7.1% and continued high margins could result in the company maintaining or even increasing dividends.

7. Medibank Private

Medibank is Australia’s leading private health insurer. Australia operates a 2-tier healthcare system with Medicare offering free basic services, but often long wait times for non-emergency operations; while private health insurance offers faster access to specialists and non-emergency medical services.

Medibank Private was a government-owned corporation from its establishment in 1975 to 2014 when it was privatised at $2.15 a share. Nine years later it is $3.28, so it hasn’t been a stellar performer. However, going into a slowing economy, Medibank offers the characteristics of a solid defensive stock – steady revenue, consistent dividends, and reasonably protected from slower consumer spending.

As of 8 March, Medibank was trading at a 3.8% yield.

8. Mercury New Zealand

Mercury generates electricity in New Zealand through nine hydro generation stations, five wind plants and five geothermal generation stations.

New Zealand is aiming to reduce reliance on natural gas and coal. The approach New Zealand has taken is with tradable carbon credits, which create a market mechanism aimed at reducing carbon emissions as efficiently as possible.

Over time, the government raises the cost of buying carbon credits, which increases the incentive to reduce emissions. This could phase out coal and natural gas and drive up the price of electricity.

This rosy outlook seems to justify the relatively low dividend yield of 3.1%. However, there is a possibility of the NZ government preventing Mercury from taking full advantage of rising electricity prices.

9. Whitehaven Coal

Whitehaven operates four coal mines in New South Wales and Queensland and exports coal to countries in Asia. Whitehaven exports both high-value metallurgical coal (for making steel) and lower-value thermal coal for electricity generation.

Over the past year – and possibly into the future – the big story has been thermal coal prices.

There’s been a lot of talk about closing down coal-fired power stations in the west. However, China didn’t get the memo. China added 198 GW of new coal-fired power plants in 2021 with another 260 GW in the pipeline, according to E3G. For comparison, Australia’s total coal-fired power capacity is just 24.7 GW.

With continuous demand, Whitehaven may continue to enjoy high earnings and maintain or raise its high dividend yield of 9.9% as of 8 March.

10. Elders Group

Elders provides agricultural inputs to farms including seeds, fertilisers, chemicals, animal health products and agricultural services, among others.

The war in Ukraine has helped push up the prices of corn, wheat and beef, all of which are significantly higher than in 2019. This should help Elders maintain their growth.

The company has increased sales every year for the past four and increased dividends every six months for the past 30 months.

Elders has increased dividend payments every six months since 2019 and paid out 50c over the past year. As of 8 March, Elders was trading at a 6.1% yield.

How to trade or invest in ASX dividend stocks

1. Learn more about ASX dividend stocks
2. Find out how to trade or invest in ASX dividend stocks
3. Open an account
4. Place your trade

You can open a position on ASX dividend stocks either through share trading or derivatives trading. Share trading means that you take direct ownership of the stock. By comparison, derivatives trading – such as CFD trading – allows you to speculate on the price movement of a company’s shares without actually taking ownership of them.

For a complete breakdown of the benefits and drawbacks of each strategy, please click here.

ASX dividend stocks: further important information to consider

Many investors add ASX dividend stocks to their portfolios for the long term. While this is a sound investment strategy, it also means that any errors are correspondingly magnified.

One key thing to note is that these ‘top 10’ dividend stocks are not the highest yielding. These are stocks that appear to have a decent chance of continuing to pay out dividends, although there’s no guarantee of future success. Investors can often have higher success with lower-yielding shares of growing businesses rather than get caught in a yield trap.

Avoiding yield traps

A ‘yield trap’ is a stock with a high yield underpinned by poor financials. If a company issues a higher-than-normal dividend or its share price falls quickly, it can appear to be high-yielding. However, the yield is calculated using past figures that do not account for very recent performance.

Many investors are caught out by the siren’s song of ultra-high-yield percentages without considering the whole picture.

Often yielding stocks either have low growth potential because management pays out all the profit in dividends, or else they are cyclical stocks such as mining companies that can generate enormous amounts of cash and pay dividends for four years, and then generate almost zero cash on the down cycle. .

Accordingly, higher-yielding dividend stocks usually require more active management, while lower-yielding ones come closer to truly passive income. Similarly, compounding by reinvesting dividends can exponentially increase returns.

Diversifying to spread risk

It’s also worth noting that many ASX dividend stocks are blue chips with very low chances of the outsized capital gains that ASX growth stocks can deliver. It can make sense to have a mixed portfolio that offers potentially bigger returns in exchange for a little safety.

Finally, it’s important to consider the concentration or diversification of a company’s interests and revenue. Companies with the most resilient dividends are often the ones with diversified interests in their sector.

And investors should take care to spread their money across multiple sectors, to further reduce risk. Piling all of one’s capital into mining stocks might give a stellar return right now, but usually at the cost of a good night's sleep.

How to invest

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