Top 5 ASX dividend shares to watch in January 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 January 2026

From Autosports’ humble 2.07% dividend yield to New Hope corporation’s respectable 8.48%, these five shares offer dividend income, backed by solid fundamentals.

Our selection criteria

• Dividend cover ratios above 1.5x for sustainability
• Spread across a number of Australia’s strongest sectors to reduce risk, including mining, commercial services and finance
• Recent financial performance supporting dividend payments – including growing share price values over the past three months in most cases
• Market capitalisations from A$233.96 million to A$3.38 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 December 2025.

1. Pepper Money (ASX: PPM)

Industry: Finance

Market cap: A$973.49 million¹

Dividend yield: 6.16%²

Dividend cover ratio: ~3.13x

Pepper Money is a specialist non‑bank lender in Australia. It operates in a space alongside big banks but focuses on lending segments that are often underserved by the major lenders – like mortgage loans, asset finance and commercial lending.

Its business model revolves around originating, acquiring and managing a diversified portfolio of loans. The company aims for disciplined credit practices and diversified funding sources, which can help it navigate varying interest rate environments and credit conditions.

One of the reasons share traders look at Pepper Money is its capacity to generate consistent earnings from interest‑bearing assets, combined with a strategy to manage credit risk and funding costs.

Its dividend profile has historically been supported by relatively strong earnings compared with dividend payouts, helping to produce a high dividend cover metric.

Highlights:

• Because Pepper Money isn’t a traditional bank, its performance can be influenced by lending volumes, credit performance and access to capital markets for funding
• It operates through a mix of direct origination and partnerships, and its performance tends to reflect broader credit demand conditions in the housing and commercial loan markets
• For share traders interested in financial sector income plays, Pepper Money can offer exposure to niche lending with a focus on diversified credit products and growing customer segments
• Its share price has grown a healthy 8.91% over the past three months

2. Smartgroup Corporation (ASX: SIQ)

Industry: Commercial services

Market cap: A$1.23 billion³

Dividend yield: 5.55%⁴

Dividend cover ratio: ~3.08x

Smartgroup is a business services company that provides outsourced salary packaging, fleet management and related administrative services to organisations around Australia.

Its role is largely operational and service‑oriented: it manages complex administrative tasks for employers and employees, particularly in areas like salary packaging and novated leases.

The company’s revenue model is built on contracts with corporate and government clients, generating recurring fee income as it administers salary benefits and vehicle leasing arrangements. Because these services are often essential and long‑term in nature, Smartgroup’s earnings tend to be relatively stable and predictable.

The company has also benefited from broader industry trends, for example, increased adoption of novated (a legal process where a new contract replaces an old one) leasing and evolving employee benefits frameworks – which can support steady growth in its client base.

Highlights:

• Its dividend cover has historically reflected a relatively conservative payout policy compared with earnings, which many income‑oriented investors find appealing
• Performance in this sector can depend on employment trends, regulatory changes affecting fringe benefits and the broader economic cycle.
• Its share price has risen by 11.95% over the past three months

3. Autosports Group Limited (ASX: ASG)

Industry: Retail trade

Market cap: A$796.41 million⁵

Dividend yield: 2.07%⁶

Dividend cover ratio: ~4x

Autosports Group is a retail automotive company with a presence across major Australian cities and New Zealand.

Its core operations are selling new and used motor vehicles from a range of global brands, providing aftermarket products (like accessories and spare parts) and offering servicing, financing and insurance products. Its footprint includes multiple dealerships and service outlets, making it a diversified player in the automotive retail sector.

The company’s performance is closely linked to consumer demand for vehicles, which can vary with economic conditions, interest rates and consumer confidence.

Autosports generates income not only from car sales but also aftermarket services and dealer finance products, which can help smooth revenue across cycles.

Highlights:

• A solid dividend cover ratio indicates that the company’s earnings have historically been strong enough to support its dividends without overstretching profits, which is a positive signal for income sustainability
• Because vehicle retailing is somewhat cyclical, Autosports’ results can fluctuate with broader economic shifts, but its diversified operations across brands and services can help moderate volatility
• The company’s share price has grown by 17.99% over the past three months

4. Bisalloy Steel Group Limited (ASX: BIS)

Industry: Non-energy minerals

Market cap: A$233.96 million⁷

Dividend yield: 5.03%⁸

Dividend cover ratio: ~2.44x

Bisalloy Steel Group is an industrial company that manufactures high‑performance steel products, including quenched and tempered, high‑tensile and abrasion‑resistant steels, used in infrastructure, mining, defence and construction applications. It sells both domestically and internationally, serving industries that need specialised steel with strong mechanical properties.

The company’s focus on specialised, value‑added steel types differentiates it from basic commodity steel producers. Its manufacturing capabilities and established customer base allow it to generate revenue from sectors that value durability and performance.

Financial health and dividend policies in industrial companies like Bisalloy can be influenced by commodity price cycles, order activity and global infrastructure demand. In periods of strong construction and industrial activity, demand for resistant steel products can support earnings growth.

Highlights:

• Dividend cover ratios that are above 1.5 suggest that earnings historically have been reasonably robust compared to the company’s dividend payouts – a positive for share traders focused on income stability
• Because of its smaller size and niche focus, Bisalloy may exhibit more variability in performance than larger industrial peers, but its specialised product portfolio and market niche are key differentiators
• Over the past three months, its share price has decreased by 9.04%, but is up 35.73% in the past six months⁹

5. New Hope Corporation Limited (ASX: NHC)

Industry: Energy minerals

Market cap: A$3.38 billion¹⁰

Dividend yield: 8.48%¹¹

Dividend cover ratio: ~3.33x

New Hope is an established energy and resources company best known for its thermal coal mining operations. It operates major mines in Queensland and New South Wales, producing coal for export and domestic markets.

The company also has interests in logistics, port handling and related infrastructure that support its core mining operations.

Coal remains a significant energy source globally, particularly in markets where it’s used for electricity generation.

New Hope’s long mine lives and established export channels help underpin the ongoing production of thermal coal, while strategic assets like coal handling facilities provide additional operational support.

Dividend policies for resource companies can be influenced by commodity price cycles, production volume and cost management.

Highlights:

• A dividend cover above 1.5 indicates that New Hope has historically maintained a buffer between earnings and dividend payouts – helping provide some income stability even through commodity price fluctuations
• Its outlook is tied to global energy demand and pricing as well as regulatory, environmental and operational factors that can affect production levels and costs
• Over the past three months, its share price has grown by a very moderate 0.25%

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, December 2025
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11. TradingView, December 2025