Top 5 ASX dividend shares to watch in May 2026

How ASX dividend shares work (and what to look for)

ASX dividend stocks are shares in Australian companies that pay part of their profits back to shareholders as cash or additional shares. For many traders, they’re a way to earn regular income without selling their investments.

When you’re picking dividend stocks, there are three key things to check:

• Dividend yield – This is the annual dividend amount divided by the share price. For example, if a $10 stock pays $0.50 in dividends each year, its yield is 5%. Higher yields can look tempting, but they’re not always better
• Dividend cover ratio – This shows how many times a company’s profit can pay for its dividend. A cover ratio of around 1.5x or higher is generally seen as sustainable.  Anything much lower means the company might be stretching to afford its payouts
• Company health – Even if the yield and cover ratio look good, check that the business has steady earnings, manageable debt and a track record of paying dividends consistently

If you keep these three points in mind, you can filter out weaker candidates before you invest.

Avoiding dividend traps

A ‘dividend trap’ happens when a stock’s yield looks unusually high because the share price has dropped, often due to problems in the business. New investors sometimes buy in for the income, only to see the dividend cut and the share price fall further.

To reduce the risk of falling into a trap:

• Check the trend in profits – If earnings are falling year after year, the dividend may be at risk
• Watch the debt levels – Companies with high debt may struggle to keep paying dividends during tough times
• Look at payout history – A long history of stable or growing dividends is a good sign; frequent cuts are a warning flag

In short: a high yield on paper doesn’t mean it’s a safe income stream. A balanced approach that combines reliable dividend payers with some higher-yield opportunities can help smooth out risk.

Top 5 ASX dividend shares to watch in May 2026

From Codan Limited’s 0.85% dividend yield to IPH Limited’s respectable 11.81%, these five shares offer dividend income, backed by solid fundamentals.

Our selection criteria

• Dividend cover ratios above 1.5x for sustainability
• This month’s list covers industrials, electronics, finance and more – some of Australia’s strongest sectors
• Recent financial performance supporting dividend payments – including growing share price values over the past year to date (YTD) in all cases, albeit some quite moderately
• Market capitalisations from A$932.01 million to A$8.30 billion

Overview of the shares in this article

Each of the stocks in this article can be share traded and CFD traded with IG Australia.

All figures are accurate as of 30 April 2026.

1. Ridley Corporation (ASX: RIC)
 

Sector: Process Industries

Market cap: A$1.06 billion

Dividend yield: 3.56%

Dividend cover ratio: ~2.40x

Ridley is a leading high-performance animal nutrition solutions provider. It operates stockfeed mills across Australia and provides essential rural products and services. It takes animal and fish by-products and recycles them into nutritious feed ingredients for the agricultural sector.

Over the last six months, the company has remained focused on its core operations and strategic network expansion. News has largely centred on its ability to maintain steady operations despite the typical ebbs and flows of the agricultural cycle.

For share traders, Ridley is often seen as a solid defensive option. Because it provides essential products to the food industry, its demand remains relatively stable even when the broader economy is struggling. Its commitment to maintaining a conservative payout allows it to reinvest in its mills, which supports long-term value and consistent distributions.

Risks:

• There are environmental risks. Since the business is tied to agriculture, prolonged droughts or changes in livestock demand can impact the volume of feed required by farmers
• Additionally, fluctuations in the cost of raw materials for feed production can occasionally squeeze profit margins if they cannot be passed on to customers immediately

2. Reece Limited (ASX: REH)
 

Sector: Industrial distribution

Market cap: A$8.30 billion

Dividend yield: 1.28%

Dividend cover ratio: ~4.60x

Reece is a household name in the plumbing and bathroom supplies industry. With a massive network of branches across Australia, New Zealand and the US, it supplies everything from taps and toilets to specialised equipment for large-scale waterworks projects. It’s effectively the backbone of the residential and commercial plumbing trade.

The past half-year has been a period of strategic investment and network growth for the group. Recent news highlights a significant expansion in its US operations, where it’s been opening new branches to gain a stronger foothold in the American market. While this expansion has come with higher costs, the general sentiment remains focused on its long-term vision of becoming a global leader in trade supplies.

Share traders often find Reece attractive because of its dominant market position and high-quality management. The company is known for its blue-chip reliability and its ability to maintain a strong financial cushion. By keeping its dividend cover well above minimum requirements, it demonstrates a level of financial discipline that protects the business during slower construction cycles.

Risks:

• As a supplier to the building trade, Reece is sensitive to interest rate changes and housing affordability

3. Codan Limited (ASX: CDA)
 

Sector: Electronic equipment

Market cap: A$7.64 billion

Dividend yield: 0.85%

Dividend cover ratio: ~2.63x

Codan is a technology manufacturer that specialises in high-tech communications and metal detection equipment. Based in Adelaide, it operates in two main areas: providing tactical communications for military and emergency services and creating world-leading gold detectors for both hobbyists and professional miners.

Recent news for Codan has been exceptionally positive, with the company recently upgrading its financial outlook. This boost was driven by strong demand for its defence communications technology and the successful launch of new gold detection models.

While it operates in high-growth tech sectors, it maintains a conservative approach to its finances. Its high dividend cover ratio shows that it earns far more than it pays out, which provides a massive buffer and allows it to fund its own research and development without needing to take on excessive debt.

Risks:

• One potential risk is the company’s higher-than-average price volatility. Because it’s a mid-sized tech stock, its share price can move more dramatically than larger companies in response to market news

4. United Overseas Australia Limited (ASX: UOS)
 

Sector: Finance

Market cap: A$1.28 billion

Dividend yield: 3.33%

Dividend cover ratio: ~2.83x

United Overseas Australia is a property development and investment group with a heavy focus on the Malaysian market. Though listed on the ASX, it’s a major player in Kuala Lumpur, where it develops, builds and manages prime commercial and residential real estate. It handles everything from the initial construction to long-term leasing.

News over the last six months has highlighted UOA’s steady hand in a fluctuating property market. The company has continued to progress its development pipeline in Malaysia and has maintained a strong track record of finishing projects ahead of schedule. It’s also focused on managing its existing portfolio of investment-grade assets to ensure a steady stream of rental income.

The company is famous for having a solid balance sheet, often holding significant cash reserves. It’s often viewed as a value play for those who prefer safety over flashy growth.

Risks:

• Since almost all its operations are in Malaysia, changes in Malaysian government policy or a weakening of the Malaysian ringgit relative to the Australian dollar can affect the value of its reported earnings and the share’s overall performance

5. IPH Limited (ASX: IPH)
 

Sector: Specialty business services

Market cap: A$932.01 million

Dividend yield: 11.81%

Dividend cover ratio: ~2.40x

IPH is an international intellectual property (IP) services group and is the leading provider of patent and trademark services in the Asia-Pacific region – and it’s recently expanded significantly into Canada. It helps businesses protect their inventions, brands and ideas through a network of professional member firms.

The most recent six months have been defined by strategic growth and integration. News has centred on its ongoing expansion into the Canadian market through several key acquisitions of local IP firms. This strategy is part of a broader plan to diversify its earnings away from just the Australian and Asian markets and build a truly global professional services powerhouse.

IPH offers a defensive business model. Companies need to protect their patents and trademarks regardless of how the economy is performing, which leads to fairly reliable revenue.

Risks:

• Integrating several different companies across different countries can be difficult. If these new businesses don’t perform as expected, it could impact the group's profit margins

How to trade ASX dividend shares with IG AU

CFDs

1. Open a CFD trading account with IG AU
2. Search for ASX dividend shares on the IG platform
3. Decide whether to go long (buy) or short (sell)
4. Choose your position size
5. Set stop-loss and limit orders
6. Place your trade and monitor it

Share trading

1. Open a share trading account with IG AU
2. Search for ASX dividend shares
3. Choose the shares you want to buy
4. Determine how many shares you want to purchase
5. Place your order
6. Monitor your investment and collect any dividends

FAQs about dividend shares 

Footnotes

1. TradingView, April 2026
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