Income investors certainly have a lot of choice on the Australian share market.
To narrow things down, let's look at a couple of ASX dividend stocks that are rated as buys by brokers and are being tipped to provide investors with good dividend yields in the near term.
Here's what they are saying about these stocks:
Analysts at Ord Minnett see Santos as an ASX dividend stock to buy now.
It is one of Australia's largest energy producers and appears well-placed to pay big dividends thanks to its positive free cash flow (FCF) outlook.
This strong cash flow is being underpinned by its Pikka and Barossa LNG projects. The broker said:
An estimated FCF yield of 20% once Pikka and Barossa LNG start producing, and rigorous control of how that extra cash is spent, implies to us that Santos will have plenty of room to return excess capital to shareholders either via an increased payout ratio or share buybacks. In our view, the medium-term prospects for Santos offer a compelling investment opportunity.
When it comes to income, the broker is expecting Santos to pay dividends of 41 cents per share in FY 2024 and then 44 cents per share in FY 2025. At the current share price of $6.66, this implies appealing yields of 6.15% and 6.6%, respectively.
Ord Minnett currently has a buy rating and $8.50 price target on the company's shares.
Another ASX dividend stock that could be a buy for income investors in December is Smartgroup.
It is a simplified employee management services provider offering salary packaging, fleet management, and a range of other services to businesses across Australia.
Analysts at Bell Potter are feeling very positive about the company. This is due to its defensive earnings, favourable tailwinds from electric vehicle adoption, and its attractive valuation. It explains:
Smartgroup 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. 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 income, 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 $7.84, this means big potential dividend yields of 6.8% and 7.6%, respectively.
Bell Potter currently has a buy rating and $10.00 price target on its shares.
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