ASX companies still paying dividends

Richard Hemming

Looking for ASX companies still paying dividends? These 14 companies are still paying dividends and will give growth to ASX investors. 

When there is increased stock market uncertainty and volatility, ASX companies still paying dividends represent an important price signal for ASX investors. The vast majority of ASX companies, both Big and Small, did not pay an interim dividend to ASX investors. Dividends in 2020 are at risk as ASX companies err on the side of caution. So what ASX companies are still paying dividends? 
 

14 ASX Companies still paying Dividends  

Our March 2019 Small Cap Dividend Portfolio has returned 11% versus -1% return of S&P/ASX All Ords Index. 

Under the Radar Report have found 14 ASX companies still paying dividends for candidates in tomorrow's stock report. We found these ASX companies still paying dividends after searching through our universe of 100 Small Caps. These ASX companies have the ability to pay dividends in the current climate of sales falling through the floor. On any level this is an impressive feat. It’s doubly impressive because with Small Caps you are also getting growth potential, largely absent in their bigger counterparts. 
 

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ASX Companies paying dividends in tough times sends a strong message

A ASX company still paying dividends is sending a strong message to ASX investors about its future prospects and performance, which demonstrates the company’s financial strength. The 14 ASX companies still paying dividends in tomorrow's stock report have survived and will come out strong performers. These 14 ASX companies still paying dividends are the quality we look for in an ocean of uncertainty.


Investing for growth with a dividend

At Under the Radar Report we don’t just look for the best ASX companies paying dividends but also capital growth. Growth is important because you want your investment to appreciate over time. Many ASX investors will go straight to investing in ASX Blue Chip stocks for dividends. However, it’s much easier for a small company to double or triple in size than it is for a big company to grow up 5% or 10%. 
 
The volatility of the market shows how important it is for ASX investors to own companies whose returns are not simply reliant on dividends. Having more than doubled in the decade following the financial crisis to climb over 7000 in late February, the S&P/ASX All Ords Index dived a third to mid-March, before its powerful rebound. It is now ~14% below its record level.
 
Paying dividends only makes sense when a ASX company can afford to pay them out of retained earnings and leave enough left to invest in its business. This is what you can see in the performance of the dividend paying companies we recommended just over a year ago. The portfolio of dividend paying companies has returned 11%, which compares to the -1% return of the S&P/ASX All Ords.

Two big takeouts from the ASX companies paying dividends

  • The power of Small Caps and the exceptional growth they can generate for ASX investors; and

  • The power of diversification.

Data#3 is a big beneficiary of the accelerated digitalisation from COVID-19. Who hasn’t been working and studying at home? But also, who could have predicted this? Nobody. If you have a number of irons in the fire, one of them can transform your portfolio.
 

What we’re looking for in dividend paying companies

It’s taken as given that the 14 ASX companies still paying dividends that we include in tomorrow's stock report have strong balance sheets. What we are also looking for is how much these ASX companies still paying dividends are covered by earnings. Only by reinvesting profits can any companies still paying dividends grow its asset base. For Small Caps this is particularly powerful because the asset bases are small, hence the compounding effect is huge. The third thing we’re looking for is the sustainability of earnings. To learn more about how we choose our Small Cap stock, click here.
 

What about valuation?

ASX investors should not be put off by the low dividend yields. The fact that these companies are paying dividends at all is the big deal. The key to making money over the long-term is buying stocks at sensible prices.


 

About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

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