While some experts say stock markets are starting to reflect that inflation is now under control, pricing pressures continue to impact our everyday lives — and equity returns. One way to help offset the rising cost of living is with some extra income.
To seek out some potential extra earnings, we asked our Foolish contributors which ASX dividend shares are grabbing their attention in October. Here’s what the team came up with.
8 best ASX dividend shares for October 2022 (smallest to largest)
Accent Group Ltd (ASX: AX1), $707.14 million
Dicker Data Ltd (ASX: DDR), $1.67 billion
Deterra Royalties Ltd (ASX: DRR), $2.25 billion
Metcash Limited (ASX: MTS), $3.73 billion
Yancoal Australia Ltd (ASX: YAL), $8.02 billion
Wesfarmers Ltd (ASX: WES), $50.88 billion
Woodside Energy Group Ltd (ASX: WDS), $64.46 billion
Westpac Banking Corp (ASX: WBC), $82.28 billion
(Market capitalisations as at market close on 14 October 2022)
Why our Foolish writers love these ASX dividend shares
Accent Group Ltd
What it does: Accent Group is a footwear retailer behind many staple Aussie shoe stores. It boasts more than 500 stores spread over 19 brands, including The Athlete’s Foot, Glue, and Hype.
By Brooke Cooper: The Accent Group share price has struggled in 2022, falling 47% year to date to $1.305 at the close of trade on Friday.
That dip might present a buying opportunity. My Fool colleague James reports that Morgans tips the stock to lift 60% to trade at $2.
The company is also a consistent dividend payer. It’s currently trading with a 5.2% dividend yield, offering 6.5 cents of fully-franked dividends per share over the last 12 months. That’s been predicted to increase too.
The broker expects the company to offer 9 cents per share this financial year and 11 cents per share in the 2024 financial year.
Motley Fool contributor Brooke Cooper does not own shares of Accent Group Ltd.
Dicker Data Ltd
What it does: Dicker Data is one of the largest technology hardware, software, cloud, cybersecurity, access control and surveillance distributors in Australia and New Zealand.
By James Mickleboro: I think Dicker Data could be a quality option for income investors thanks to its long track record of growth and its positive long-term outlook.
Pleasingly, the company’s strong form has continued in FY 2022, with Dicker Data reporting a 36% increase in first-half revenue and a 19.5% lift in earnings before interest, tax, depreciation, and amortisation (EBITDA).
Dicker Data recently raised funds to extend its warehouse by 70%. This provides a significant runway to capture additional growth in the coming years and is also expected to deliver cost savings.
Morgan Stanley currently has an outperform rating and a $14.00 price target on Dicker Data shares. As for dividends, its analysts forecast fully-franked dividends per share of 36.2 cents in FY 2022 and 42.2 cents in FY 2023.
The Dicker Data share price of $9.26 at Friday’s close will mean yields of 3.9% and 4.5%, respectively.
Motley Fool contributor James Mickleboro does not own shares of Dicker Data Ltd.
Deterra Royalties Ltd
What it does: Deterra Royalties holds several royalties over mining areas in Western Australia. The company predominantly derives its revenue from a royalty over Mining Area C (MAC), an iron ore mining hub majority-owned by BHP Group Ltd (ASX: BHP).
By Mitchell Lawler: I’ll be the first to admit I’m not often a fan of ASX shares with exposure to the resource sector. However, I think Deterra Royalties is differentiated from most companies involved in digging up and processing commodities.
While demand for iron ore might ebb and flow from year to year, there’s no doubt that steel plays an integral role in society. As such, BHP plans to continue increasing production from its MAC mining hub in future years, which would result in higher revenues for Deterra.
Additionally, Deterra is less exposed to the potential impacts of inflation due to the nature of a royalty-based business model. In the last financial year, Deterra recorded a minuscule $729,000 in operating expenses, leaving the rest of its $265 million revenue to flow through to the bottom line.
Right now, Deterra is delivering a tantalising 8.3% dividend yield – and it’s debt free.
Motley Fool contributor Mitchell Lawler does not own shares in Deterra Royalties Ltd.
Metcash Limited
What it does: Metcash has three pillars to its business. Through its food pillar, it supplies independent supermarkets, such as IGA. Its liquor segment supplies Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel and Duncans. Finally, Metcash owns brands like Mitre 10, Home Timber & Hardware and Total Tools in its hardware division.
By Tristan Harrison: I think Metcash’s food and liquor divisions provide the company with a defensive source of earnings during these uncertain times.
I like the company’s efforts to invest in its businesses with MFuture, designed to help online sales and efficiencies. Metcash is constructing new warehouse and distribution facilities and has completed a paperless warehouse initiative. For online sales, it is rolling out e-commerce initiatives for IGA retailers.
In my opinion, the hardware business can deliver good profit growth over the long term, particularly as it expands its network.
The Metcash share price is near its 52-week low, yet in the first 17 weeks of FY23 to 28 August, group sales were up another 8.9%.
Using the FY22 payout of 21.5 cents, Metcash has a grossed-up dividend yield of around 8%.
Motley Fool contributor Tristan Harrison does not own shares of Metcash Limited.
Yancoal Australia Ltd
What it does: Yancoal Australia is a pure-play ASX coal mining company producing both thermal and metallurgical coal. Its seven coal mines are in tier 1 Australian locations with a two-decade average mine life. The company sells its coal globally.
By Bronwyn Allen: Many commodity stocks are having a cracking 2022 because commodity prices have skyrocketed.
This means mining companies are making more money on the stuff they dig out of the ground while their costs stay the same, or at least don’t rise by as much.
Sure, inflation is now running at a 20-year high of 6.1% per annum but the coal price is up 66% year over year, so you see my point.
As we reported recently, the analysts’ consensus has Yancoal paying about a 37% dividend yield in FY22, which is about 8x the average of the S&P/ASX 200 Index (ASX: XJO).
As Katana Asset Management points out, that’s a third of your investment back in one year.
A word of caution, though: Commodity stocks are paying bigger dividends today because of the high coal price. When the commodity price changes, so will your dividend returns.
Motley Fool contributor Bronwyn Allen does not own shares of Yancoal Australia Ltd.
Wesfarmers Ltd
What it does: Wesfarmers is a diversified ASX 200 retail company. Its divisions include household names like Bunnings Warehouse, Kmart Australia, Covalent Lithium and Officeworks, among others.
By Bernd Struben: Wesfarmers is well-known among income investors for its reliable dividend payments, traditionally making two fully-franked dividend payments per year.
The company even made its two payouts in the pandemic-addled year of 2020. And it offers a dividend reinvestment plan (DRP).
With the Wesfarmers share price down 24.3% year to date, the stock currently trades on a trailing yield of 4.01%. Analysts at Morgans forecast dividend payouts of $1.82 in the current financial year and $1.89 in FY24. That would mean stable yields this year edging up to 4.2% the following year.
Sweetening the picture, Morgans has a $55.60 target for the Wesfarmers share price, 24% above Friday’s closing price of $44.87.
Motley Fool contributor Bernd Struben does not own shares of Wesfarmers Ltd.
Woodside Energy Group Ltd
What it does: Woodside is an oil and gas-producing giant. Woodside is one of the top 10 energy companies in the world following its merger with the petroleum arm of BHP Group.
By Monica O’Shea: Woodside shares have soared nearly 51% in the year to date based on Friday’s closing price of $33.07XX.
Woodside investors recently received a fully-franked interim dividend of US109 cents. This is 263% higher than the interim dividend of US30 cents paid in 2021 and 319% higher than the US26 cent dividend paid in 2020.
With the ongoing Russian and Ukraine conflict, the outlook for gas and oil prices remains uncertain.
However, a recent Federal Industry Department Resources and Energy Report is tipping Australian LNG export earnings to surge by nearly 29% in the 2023 financial year before pulling back in 2024.
The report noted Russia’s invasion of Ukraine was placing “upward pressure on LNG prices”. Oil export earnings are also tipped to rise in FY23 before easing in 2024.
Given this, I believe Woodside will likely remain a decent dividend investment in the near term.
Motley Fool contributor Monica O’Shea does not own shares of Woodside Energy Group Ltd.
Westpac Banking Corp
What it does: Westpac is one of the six banking majors in Australia and operates in traditional banking markets of lending and financial services.
By Zach Bristow: Investors have enjoyed a lengthy stream of dividends from Westpac dating back to some of the earliest days of the Australian Securities Exchange (ASX).
The current macroeconomic climate would typically be positive for ASX banking shares, however, this hasn’t been the case in 2022.
Despite this, the consensus of analyst estimates forecasts Westpac to deliver a 6% forward dividend yield in FY23, according to Refinitiv Eikon data [at the current share price].
The bank also delivered an above-sector net interest margin in FY21 and looks well-positioned to continue generating free cash flow for its future dividend payouts.
As such, investors might take advantage of any pricing weakness to capture the 6% yield, whilst analysts at UBS value Westpac shares at $27 apiece.
Motley Fool contributor Zach Bristow does not own any shares in Westpac Banking Corp.
The post Top ASX dividend shares to buy in October 2022 appeared first on The Motley Fool Australia.
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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Dicker Data Limited. The Motley Fool Australia has positions in and has recommended Dicker Data Limited and Wesfarmers Limited. The Motley Fool Australia has recommended Accent Group and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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