3 experts pick their top ASX dividend stocks to watch in 2022

Looking to boost your income? Here are some of the ASX dividend stocks that experts think are worth watching in 2022.

With savings and term deposit rates at record lows, you may be looking for an alternative place to grow your cash. One way you could earn passive income is through dividends paid out by companies whose shares you’ve invested in.

It can be a risky approach, though, and your potential income is subject to companies making enough profit to pay dividends and deciding to do so rather than reinvest funds into the business instead.

What is the outlook for dividends in 2022?

Australian investors may see a dip in dividend payouts this year, compared to the ‘dividend bonanza’ received in the 2020/21 financial year.

“We’re expecting dollar income to be lower for 2022 relative to 2021,” Scott Kelly, portfolio manager at DNR Capital, told Canstar. “That’s primarily because the big miners are paying comparatively lower dividends given lower iron ore prices.”

“Nonetheless, for the broader market we are still expecting to grow earnings, increase payout ratios and return capital to investors; however, it will just be difficult to offset the big dollar dividends that were paid last year by the miners.”

Martin Currie Australia Chief Investment Officer, Reece Birtles, agreed that the dividend growth outlook was weaker this year, but said the forecast was still positive.

“Companies have got quite conservative payout ratios currently which they can lift and conservative balance sheets that they could utilise,” Mr Birtles said.

AMP Capital portfolio manager Dermot Ryan noted that yields are low in traditional sectors, such as property, infrastructure and fixed income, but equities are in a reasonably good position.

“We think this year is going to be a good one for both dividends but also special dividends and off-market buybacks,” Mr Ryan said.

ASX dividend stocks to watch in 2022

Below are Dermot Ryan’s, Reece Birtles’ and Scott Ryan’s opinions on the stocks to watch in 2022. Remember to do your own research before making any investment decisions. Keep in mind past performance is not a reliable indicator for future performance. You might also want to seek advice from a licensed financial adviser to help make sure your investments are suited to your circumstances and risk tolerance.

Dermot Ryan, AMP Capital Portfolio Manager

Retail: Harvey Norman Holdings (ASX: HVN) and JB Hi-Fi (ASX: JBH) 

“As mobility improves through the year, we expect more returns coming from the retail space because balance sheets are strong in that space. Those sectors are both cheap but also have been benefiting from domestic spending because households have a lot of savings at the moment… We like Harvey Norman and JB Hi-Fi in the retailer space.”

Resources: Mineral Resources (ASX: MIN) 

“We also really like resources across the board because of shortages created by the virus impacts. We are seeing very strong pricing. Oil prices are at the highest levels since 2014. LNG [liquefied natural gas] prices are at record levels. We’re also seeing other strong pricing in Australian major commodity export iron ore. We are seeing fully franked dividends being returned at almost record levels across that space again this year… [Examples include] Mineral Resources.”

Healthcare: Estia (ASX: EHE) and Regis Healthcare (ASX: REG)

“We also like healthcare stocks. The dividend outlook isn’t as strong for them in the short term but we think over time the healthcare spending is going to increase due to the follow on from the pandemic as people take more care of themselves and governments spend more money in that space. We quite like the aged care stocks and hospitals [such as] Estia and Regis in aged care.”

At the time of interview, Dermot Ryan is Co-Portfolio Manager of the AMP Capital Equity Income Generator Fund, which holds a position in the stocks Dermot has mentioned.

Reece Birtles, Martin Currie Australia Chief Investment Officer

Resources: BHP Group (ASX: BHP) and Alumina Limited (ASX: AWC)

“With high iron ore prices and the profitability it has post removing the dual-listed structure, BHP’s ability for higher capital returns is actually very strong this year.

“In the mining space, one of the names that we are very keen on this year is Alumina. That’s because the aluminium price is very well supported by demand for net zero projects, the transition to net zero energy costs flow through into higher aluminium prices and there has been supply constraints. We think the cash flows that they can produce going forward are much stronger.

“We see that the dividend profile for BHP is very strong in the short-term but is likely to reduce, whereas something like Alumina looks really good from a growing dividend perspective.”

Healthcare: Medibank Private (ASX: MPL)

“The cash flows and profitability of Medibank continue to be strong but the thing that we really like about them is their strong market position within that industry, their low cost position and their focus on trying to lower costs to customers… We see that they are in a strong position to continue growing their dividend.”

Retail: Harvey Norman (ASX: HVN) and JB Hi-Fi (ASX: JBH)

“We’re probably seeing more conservatism from the management in distributing dividends out of JB Hi-Fi and Harvey Norman than we might have expected. They are retaining very strong balance sheets pending what happens on the other side of COVID in terms of demand as consumers begin to travel more, rather than spend money on goods. So they are still in a very solid position.”

At the time of interview, Reece Birtles manages Martin Currie Australia Portfolios which holds the stocks Reece has mentioned. 

Scott Kelly, DNR Capital Portfolio Manager

Logistics: Qube Holdings (ASX: QUB)

“This is a business that has seen very strong volume growth across most areas of its business…Our view is that the market is underestimating the likelihood of more contract wins and acquisitions… It’s got a low single-digit dividend yield currently with franking on top but we are expecting double digit growth over the next five years so that’s one where we think the market is underestimating the growth potential.”

Telecommunications: TPG Telecom (ASX: TPG)

“Another stock I’d point to is TPG Telecom, resulting from the merger between TPG and Vodafone in 2020. TPG is really a challenger brand in a rational mobile market at the moment and that’s a key driver to our positive view on the telco sector.

“They’ve got synergies that should come through from the merger, they are bypassing the NBN with their wireless product… They were over indexed to backpackers and migrants into the country so once international borders open we’re expecting a strong rebound in roaming charges. It’s a low single digit dividend yield currently but we are expecting dividends to triple over the next three years.”

Insurers: Suncorp (ASX: SUN) and QBE (ASX: QBE)

“Our preference remains with insurers over the banks… our preferred exposures are Suncorp and QBE. They have dividend yields of around 5% plus franking with double digit growth over the next three years.”

At the time of interview, Scott Kelly is Portfolio Manager of the DNR Capital Australian Equities Income Portfolio and Fund which holds the stocks Scott has mentioned.

About the experts featured in this article

Dermot Ryan, AMP Capital Portfolio Manager (AFSL 232497)

Dermot is a co-portfolio manager for AMP Capital’s Australian equity income-focused strategies and covers mining and energy sectors. Dermot also manages concentrated SMA portfolios for AMP’s retail investor base. He joined AMP in 2014 from Commonwealth Private, where he managed their direct Australian equities model and SMA portfolios.

Reece Birtles, Martin Currie Australia Chief Investment Officer (AFSL 240827)

Reece is a Non-Executive Director of Martin Currie Investment Management Limited (MCIM). He is also a member of Martin Currie’s Investment Executive Committee. He has held the role of Chief Investment Officer (CIO) of Martin Currie Australia (MCA) since 2006, and is also the lead portfolio manager for MCA’s Value Equity, Equity Income and Diversified Income & Growth strategies.

Scott Kelly, DNR Capital Portfolio Manager (AFSL 301658)

Scott joined DNR Capital in August 2015 and is Portfolio Manager for the Australian Equities Income Portfolio and Fund. He is also responsible for the investment research of the telecommunications, transport, utilities, infrastructure, refining and packaging sectors. Scott has over 20 years of investment experience, with previously held positions in equity research at Morgan Stanley and UBS in Sydney and at Macquarie Bank in Hong Kong.