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The top 10 ASX dividend stocks to watch in November 2022

Australian investors who want regular cash flow in addition to capital gains have many options to choose from when it comes to the ASX. Here is a list of ten of the best ASX dividend stocks.

Source: Bloomberg

ASX dividend stocks: what you need to know

When buying any stock, traders typically benefit in two ways: from capital gains due to an increasing share price, and profit pay-outs in the form of dividends.

Usually, smaller companies in a high-growth phase focus on capital growth, using profits to expand operations. Meanwhile, larger established blue-chip companies often choose to focus on dividends, which are a cash payment to shareholders derived from a company’s earnings.

Accordingly, investing in capital growth stocks usually requires more active management to react to market news, while dividend stock portfolios often require less management. Hence, many investors seek out dividend stocks as a source of passive income.

Dividend stock investors view a stock’s dividend yield as the key measure of a stock’s value. It offers an insight into how great the return on an investment will be. To calculate the dividend yield, investors simply divide the annual dividend by the share price.

To begin initial research, IG offers market screeners to filter out ASX stocks with the highest dividend yields.

Investors should then inspect an individual company’s financial status to determine the future viability of its dividend yield. At a minimum, this should include its historical profit generation, debt levels, and prior dividend history.

It’s also worth researching its dividend policy, to see exactly under what conditions a dividend could be paid or withheld.

For those investors seeking equity assets that provide solid returns, here is a list of ten of the top ASX dividend stocks to watch as of November 2022. 

1. Wesfarmers Ltd

2. Accent Group Ltd

3. Australian Clinical Labs

4. Best & Less Group Holdings Ltd

5. Reckon

6. Harvey Norman Capital Holdings

7. HomeCo Daily Needs REIT

8. Dusk Group Ltd

9. South32 Ltd

10. Australia & New Zealand Banking Group

1. Wesfarmers Ltd (ASX: WES)

Originating as a Western Australian farmers’ cooperative, Wesfarmers is a diversified business that covers home improvement, outdoor living, apparel, health, beauty, office supplies, chemicals, energy fertilisers, and industrial products. It owns brands as diverse as Target, OfficeWorks, Kmart, and Bunnings.

The company is one of the largest employers in Australia, and its primary objective is ‘to provide a satisfactory return to its shareholders.’

It had a poor start to 2022 as consumers begin to pull back spending due to the rising cost-of-living crisis. 

However, it has an exceptional management team with a history of success. 

For FY22, the Wesfarmers board declared a final dividend of $1 per share, representing an increase of 11.1% on the back of 'strong' net profit after tax in the second half. 

The full year dividend was $1.80 per share, for an increase of 1.1%. 

2. Accent Group Ltd (ASX: AX1) 

First founded in New Zealand in 1988, Accent Group has rapidly evolved into a leading footwear retailer with over 500 stores, 19 brands and more than 20 online platforms. 

In early November, Goldman said it expected Accent to produce strong yields ahead on the back of diversified product exposure that will make the company resilient in the current cycle. 

Goldman forecasts fully franked dividends of 10.2 cents per share in FY2023, for a yield of over 6% based on Accent's current share price of $1.62.

3. Australian Clinical Labs (ASX: ACL) 

Australian Clinical Labs bills itself as a leading provider of pathology services in Australia. It has 86 NATA-accredited laboratories that perform more than 8 million episodes each year for Australian clinicians and patients. 

While Australian Clinical Labs has recently seen its share price hit by the hacking scandal in Australia's healthcare sector, QV Equities considers the company to remain well-positioned in the market. 

According to QV Equities, Australian Clinical Labs retains a strong balance sheet and has positive long-term growth prospects.

4. Best & Less Group Holdings Ltd (ASX: BST)

Best & Less bills itself as the owner of iconic retail brands, operating more than 250 stores in Australia and New Zealand. 

With a growth strategy based on its core baby and kids value apparel categories, Best & Less expects to see strong growth on a 'migration to value' by Australian families who face rising cost-of-living pressures. 

In FY22 the company paid a dividend of 12c per share, for a dividend yield of 8.8%. Macquarie analysts say Best & Less could pay a grossed-up dividend yield of nearly 13%. 

5. Reckon (ASX: RKN)

Reckon specialises in the development of user-friendly accounting software for small businesses, accountants, bookkeepers, lawyers and personal users. 

It has offices in Australia, New Zealand, the UK and the USA and lays claim more than 110,000 subscription clients following over three decades of operation. 

The software company paid out 57c per share in the last financial year – at the higher end of the proposed range of between 54c and 58c. This translated into a yield of around 3.9%. 

6. Harvey Norman Capital Holdings (ASX: HVN)

As a store-based retail company, Harvey Norman has benefited from the winding back of Covid restrictions since the start of 2022

Harvey Norman has seen strong growth in earnings per share (EPS) of 23% per year over the past three-year period. Over the same period, it has generated a total shareholder return of 18%.

The retailer continues to enjoy a strong balance sheet, putting it in a good position to dispense ample dividends ahead. 

7. HomeCo Daily Needs REIT (ASX: HDN)

As an Australian Real Estate Investment Trust (REIT), HomeCoDaily focuses on investment in convenience-based assets across the target sub-sectors of neighbourhood retail, large format retail and health & services. 

Morgans is upbeat on HomeCo, stating that it 'offers investors an attractive distribution yield which is underpinned by contracted rental income.'

According to Morgans, HomeCo's sites are situated in strategic locations with strong population growth. 

For this reason, Morgans is forecasting dividends per share of 8.3c in FY23 and 8.7c in FY24. This translates into dividend yields of 6.5% and 6.8% respectively based on a current share price of $1.28. 

8. Dusk Group Ltd (ASX: DSK)

Dusk specialises in the sale of its own exclusive brand of home fragrance products via both physical and online stores. These products include candles, ultrasonic diffusers, reed diffusers, fragrance-related homewares and essential oils. 

The company's latest annual report points to impressive growth in online sales. Based on Dusk's prevailing price levels, it is on track for a fully-franked dividend yield of over 10%. 

9. South32 Ltd (ASX: S32)

South32 is a diversified mining and metals company that produces a broad range of commodities, including alumina, bauxite, aluminium, copper, silver, lead, zinc, nickel, metallurgical coal and manganese.

Morgans maintains an add rating for South32, on improvements to its portfolio which are 'substantially boosting group earnings quality, as well as S32's risk and ESG profile.'

The broker is also impressed with South32's dividend policy, anticipating fully franked dividends per share of 22.9 cents in FY23 and 21.5 cents in FY24. Given that its share price currently stands at around $4.00, this would translate into yields of approximately 5.7% and 5.4% respectively. 

10. Australia & New Zealand Banking Group (ASX: ANZ)

ANZ is an Australian multinational banking and financial services company that is the second-largest bank by assets in the country.

This gives the ASX dividend stock a serious advantage; by dint of its size, it is relatively low risk investment. And unlike other banking competitors, it has engaged in share buybacks over the years while maintaining a healthy dividend.

Like Suncorp, ANZ is exposed to the bloated housing market on both sides of the Tasman, as it is the largest home loan lender in New Zealand and third-largest in Australia. With interest rates tightening, higher mortgage repayments must be balanced against the risk of severe recession in both countries.

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 while these ‘top 10’ dividend stocks are high yielding, this is no guarantee of future success. Investors could have higher success with currently lower-yielding shares in the future.

Another is the concept of a ‘yield trap,’ so-called for high-yielding stocks underpinned by poor financials. If a company issues a higher-than-normal dividend, or its share price falls quickly, it can appear 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.

Likewise, it’s worth remembering that the highest-yielding ASX dividend stocks are usually so attractive because management chooses to plough all profits into dividends rather than capital growth. Total return includes share price increases as well as dividends.

Moreover, maintaining a high dividend yield often requires a weak balance sheet. This can make navigating through volatile periods (such as a global pandemic or European war) difficult.

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, but many ASX dividend stock investors withdraw their returns to spend every year.

For example, most miners and banks are some of the highest-yielding ASX dividend stocks. But Australian banks stopped dividends completely during the covid-19 pandemic. And mining stocks are dependent on the commodity cycle, and especially on the iron ore price. While demand from China is strong now, any future dent could see dividends cut fast.

It’s also worth noting that most 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 — and this is crucial — the word ‘diversification’ pops up a lot in this article, and there’s a reason why. 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.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

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