ASX dividend shares are a great way to build a beginner share portfolio. Coronavirus excepted, they are a good way to generate steady cash flow and provide flexibility with reinvestment.
Here are 3 ASX dividend shares that I think are solid buys for beginners.
What’s good about ASX dividend shares?
I think the “bird in the hand” theory is a good one. Basically, a dollar today in the form of dividends is better than an uncertain amount tomorrow in capital gains.
In Australia, ASX dividend shares also have another advantage: franking credits.
The current tax imputation scheme means that dividends receive favourable tax treatment. This effectively eliminates the risk of that money being taxed at the company level and at the individual level.
That’s good news for investors, particularly those in retirement, where franking credits can actually boost your income higher.
There is, of course, regulatory risk in the form of government tax changes but it’s still a big tick for ASX dividend shares right now.
BHP and 2 more top picks for a beginner portfolio
The first ASX share I’m watching is BHP Group Ltd (ASX: BHP). BHP shares are currently yielding 5.4% with a market capitalisation of $183.3 billion.
Iron ore prices are surging and a cyclical share like BHP is doing well right now. That means that dividends may fluctuate in the short-term but I’d expect long-term income to be quite reliable.
Another ASX dividend share I’d like to buy for a beginner portfolio is National Australia Bank Ltd (ASX: NAB).
Prior to COVID-19, NAB shares had a very tidy dividend yield even amongst the ASX banks. While distributions may not return to what they were, I think NAB will remain a reliable ASX dividend share for the long-term.
Given the strong link between the Big Four banks and the Aussie economy, I also think it’s a good bet for long-term stability.
Finally, it’s worth considering a broad market exchange-traded fund (ETF). Australian companies tend to have a higher payout ratio compared to their global peers, largely due to the favourable tax treatment.
That means a broad-market ASX ETF like BetaShares Australia 200 ETF (ASX: A200) could be worth a look.
This BetaShares ETF has a 12-month net distribution yield of 4.1% with a management fee of just 0.07% per year.
This is an easy option for exposure to many ASX dividend shares like BHP and NAB in one convenient investment.
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More reading
- ASX 200 Weekly Wrap: Surging commodity prices snap ASX 200’s losing streak
- Top brokers name 3 ASX shares to sell next week
- 5 things to watch on the ASX 200 next week
- Here are a couple of safe and strong ASX dividend shares to buy
- Ready for the “80% stock market crash”?
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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