If you’re looking for dividends, then you might want to take a look at the two dividend shares listed below.
I believe both blue chips could be top options for income investors right now:
Telstra Corporation Ltd (ASX: TLS)
The Telstra share price fell heavily on Thursday despite the release of a full year result which was in line with guidance. The telco giant also declared a final dividend of 8 cents per share, bringing its full year dividend to a fully franked 16 cents per share. This was in line with FY 2019’s dividend. However, judging by the Telstra share price weakness, some investors don’t appear to believe it will be able to maintain this dividend in FY 2021.
I”m optimistic it can, based on its guidance for free cashflow after operating lease payments of $2.8 billion to $3.3 billion. While this free cash flow is lower than the $3.4 billion it achieved in FY 2020, Telstra’s free cash flow payout ratio was 74% according to Goldman Sachs. This appears to indicate that it should be able to comfortably maintain its dividend if it achieves its guidance. If this proves to be the case, based on the current Telstra share price, this will mean a fully franked 5% yield in FY 2021.
Wesfarmers Ltd (ASX: WES)
Another blue chip ASX share to consider buying for dividends is Wesfarmers. It is the conglomerate behind popular brands such as Bunnings, Kmart, Target, Catch, and Officeworks. It also has a collection of chemicals and industrial businesses. I’m a big fan of the company due to the diversity and positive outlook for these businesses and my expectation that they will underpin solid earnings and dividend growth over the next decade.
In addition to this, the company is sitting on a mountain of cash following the sell down of its stake in supermarket giant Coles Group Ltd (ASX: COL) earlier this year. I suspect that this could be deployed to make earnings accretive acquisitions in the near future. For now, based on the current Wesfarmers share price, I estimate that it provides investors with an FY 2021 fully franked ~3.1% dividend yield.
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More reading
- Metcash share price and these ASX stocks just got upgraded by leading brokers
- If an ASX share announces a demerger, here’s why you should listen
- Telstra just announced its dividend! Are Telstra shares now a buy?
- Why AGL, Breville, CBA, & Telstra shares are dropping lower today
- ASX down 0.55%: Telstra maintains its dividend, Treasury Wine shoots higher, AMP’s special dividend
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. 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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