Fortunately for income investors, they have a lot of options to choose from on the Australian share market.
So many it can be hard to decide which ones to buy over others.
To help narrow things down, let's look at a three ASX dividend shares that analysts rate as buys. Here's why they could be top options next week:
If you are not averse to investing in the mining sector, then mining giant BHP could be an ASX dividend share to buy.
That's the view of analysts at Goldman Sachs, which believe the miner is well-positioned to benefit from a copper bull market. They said:
We remain bullish on copper due to ongoing supply side challenges and increasing demand and expect BHP's copper EBITDA to increase by ~US$3bn to ~US$10bn by FY26E (~45% of group EBITDA). Under our base case, copper EBITDA is expected to reach US$14bn by FY35E and ~US$19bn with all copper growth, at GSe long run copper of US$4.44/lb (real $, from 2028).
Goldman Sachs expects this to underpin fully franked dividends of 99 US cents (~A$1.54) per share in FY 2025 and US$1.08 (~A$1.68) in FY 2026. Based on BHP's current share price of $40.70, this implies dividend yields of 3.8% and 4.1%, respectively.
Goldman Sachs has a buy rating and $47.40 price target on its shares.
Another ASX dividend share that could be a buy is Smartgroup.
It is an industry-leading provider of employee benefits, end-to-end fleet management, and software solutions with over 400,000 salary packages and 64,000 novated leases under management.
Bell Potter likes the company due to its defensive business, favourable tailwinds, and attractive valuation. It said:
SIQ looks well priced given a fwd P/E of ~14.5x, a defensive client base, earnings tailwinds from the Electric Car Discount Bill (exempts low or zero emission vehicles from Fringe Benefits Tax), an ROE of ~30% and a strong balance sheet.
In respect to dividends, the broker is forecasting fully franked dividends of 53.3 cents in FY 2024 and then 59.7 cents in FY 2025. Based on its current share price of $8.17, this would mean dividend yields of 6.5% and 7.3%, respectively.
Bell Potter has a buy rating and $10.00 price target on its shares.
Another ASX dividend share that has been given a buy rating is telco giant Telstra.
Goldman Sachs thinks income investors should invest due to its defensive earnings, positive growth outlook, and asset monetisation opportunities. It said:
We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive. We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn.
As for dividends, Goldman is forecasting fully franked dividends of 19 cents per share in FY 2025 and then 20 cents per share in FY 2026. Based on the current Telstra share price of $3.99, this represents dividend yields of 4.75% and 5%, respectively.
The broker has a buy rating and $4.35 price target on its shares.
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