In this article, we will discuss the best ASX dividend stocks heading into 2025.
Analysts often advise investors to diversify their stock portfolios globally to optimize returns. With this in mind, strong markets should be a key focus. Australia’s stock market is expected to perform well in 2025, driven by positive sentiment from potential central bank easing and China’s commitment to supporting its mining sector. Year-to-date, the Australian benchmark index has climbed nearly 8%, with a 12-month gain of around 9%. This was buoyed by the strong rally in the US equity markets, drawing increased attention from investors. The growth has also been led by technology and financial stocks, with the banking sector on track for its best performance since 2009. However, mining and energy stocks have faced challenges due to weaker commodity prices.
According to a report by BlackRock, broad Australian equities have been the second most favored investment within iShares’ local offerings this year, trailing only broad US equities. As of November 2024, they have attracted nearly $840 million in net inflows.
Also read: 13 Best Dividend Stocks to Buy Under $50
Banking stocks in the country made a remarkable impression in 2024, with a sectoral index surging over 30%, as of December 18—its strongest performance in 15 years—thanks to prolonged elevated interest rates. However, as the Reserve Bank of Australia gears up for potential rate cuts, banks may encounter earnings pressure due to tighter net interest margins, a crucial measure of profitability, and heightened competition. In addition, Australian lenders rank among the priciest globally, with the sector’s price-to-earnings ratio outpacing that of their international counterparts, as per Bloomberg data.
Analysts suggest that Australian resource stocks could gain from Beijing’s promise to boost government spending. However, local mining shares are heading for their weakest performance since 2015, weighed down by the ongoing slump in China’s property market, which continues to impact commodity prices. Morgan Stanley analysts including Rahul Anand said the following in a Dec. 15 note:
“As the market awaits visibility on tariff risk versus China stimulus benefits, we see opportunities for exposure to resources. Despite higher-than-normal iron ore inventories, steel inventories in China remain lower than 2019 levels creating iron ore restock opportunity.”
The Reserve Bank of Australia (RBA) projects that economic growth in Australia will rise modestly to about 1% by the close of 2024 and reach its typical pace of around 2.5% by late 2025. This recovery is expected to be largely driven by government spending, which has provided stability to the economy as higher interest rates have dampened private consumption. Analysts suggest that index investing offers an effective and efficient way to tap into the Australian market’s growth potential. S&P Global data revealed that nearly 70% of actively managed Australian equity funds have lagged behind the benchmark index over a three-year period. Over a 10-year timeframe, the disparity is even greater, with over 80% of managed funds underperforming the index. While active stock picking can complement a portfolio, they argue that tracking the benchmark might be one of the best strategies for investors seeking straightforward, long-term exposure to the growth of the local equity market.
Photo by Viacheslav Bublyk on Unsplash
Our Methodology:
For this list, we used a screener to identify ASX stocks. From there, we selected dividend stocks with strong histories of regularly rewarding shareholders with dividends. Then, we picked the top 10 stocks with the highest dividend yields as of December 25. The stocks are ranked in ascending order of their dividend yields.
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10. Coronado Global Resources Inc. (CRN.AX)
Dividend Yield as of December 25: 2.02%
Coronado Global Resources Inc. (CRN.AX) is an Australian company that produces high-quality metallurgical coal. The company is also a trusted supplier to the steel industry around the world. It reported strong earnings in the first half of the year. Its reported revenue of $1.34 billion and its net income came in at $16.2 million. In its earnings release, the company mentioned that 96% of its revenue was generated from Met Coal sales. As of June 30, 2024, the company reported available liquidity of $414 million and a net debt position of $5 million at the end of the first half of the year. During this period, capital expenditures totaled $137 million, which were fully financed through the business’s operational cash flows.
The significant improvement in production, sales, costs, and revenue reported in the second quarter reflects Coronado Global Resources Inc. (CRN.AX)’s ongoing commitment to enhancing all aspects of its operations, ensuring its position as a competitive and world-class provider of metallurgical coal for the long term. The company’s strategic focus on organic growth funded by operational cash flows, rather than pursuing debt- or equity-funded acquisitions, has proven wise in a market shaped by high inflation, rising taxes, and increasing royalties. In addition, progress continues on growth projects in both Australia and the United States. The Mammoth Underground project in Australia is on track to produce its first coal by year-end, pending regulatory approvals, while the Buchanan Expansion in the US is expected to be completed by the second quarter of 2025. Once fully operational, these projects are anticipated to add up to 3 million tons per annum to production capacity.
Coronado Global Resources Inc. (CRN.AX)’s cash position also remained strong. In the first half of the year, the company generated $63 million in operating cash flow. During this period, it also distributed $8.4 million to shareholders through dividends, which makes CRN one of the best dividend stocks on our list. It currently offers a bi-annual dividend of $0.05 per share and has a dividend yield of 2.02%, as of December 25.
9. MFF Capital Investments Limited (MFF.AX)
Dividend Yield as of December 25: 2.80%
MFF Capital Investments Limited (MFF.AX) is an investment company that primarily focuses on managing a diversified portfolio of investments in both domestic and international markets. The company has established itself as a well-regarded listed investment company (LIC) with a focus on global equity markets. As an LIC, it has the flexibility to adjust its investments, allowing MFF to invest across the entire global stock market. Given its broad investment scope, analysts believe that the company’s portfolio has the potential to continue generating strong double-digit returns. The recent acquisition of the investment team from the fund manager Montaka has further strengthened its outlook, and analysts expect increased investment activity in this ASX-listed company in the near future. The stock has surged by over 50% in the past 12 months.
MFF Capital Investments Limited (MFF.AX) reported its FY24 earnings in August 2024. The company maintains a robust balance sheet and strong financial flexibility. As of the year-end, its total equity amounted to $2.07 billion, which included retained profits and profits reserve of over $1.36 billion, along with contributed equity of $707.0 million. The market value of its investments was over $2.55 billion. In addition, it ended the year with nearly $89.5 million available in cash and cash equivalents, up from $28.2 million in the prior-year period.
In the financial year, MFF Capital Investments Limited (MFF.AX) saw an increase of around $9.6 million in dividends and distribution income received. The company paid out approximately $46.0 million in cash dividends, after accounting for around $17.5 million in dividend reinvestment and bonus share plan elections. Additionally, MFF made cash tax payments totaling about $60.0 million. The company was able to pay these dividends due to its strong cash generation. It reported an operating cash flow of $336.5 million for FY24, a significant increase from $137 million during the same period the previous year.
MFF Capital Investments Limited (MFF.AX) is one of the best dividend stocks on our list as the company has been growing its dividends for seven consecutive years. The company plans to continue its growth trajectory. Its dividend payout guidance indicates an expected grossed-up dividend yield of 5.1% for FY25, which includes franking credits. As of December 25, the stock has a dividend yield of 2.80%.
8. Collins Foods Limited (CKF.AX)
Dividend Yield as of December 25: 3.61%
Collins Foods Limited (CKF.AX) is an Australian company that is primarily involved in the food service and retail sectors. It operates and franchises a portfolio of well-known brands, including KFC in Australia and Europe. Though the stock has fallen by over 38% in the past 12 months, analysts are positive about its performance in the coming quarters.
Goldman Sachs highlighted in its note that the outlook has become more positive, supporting its Buy recommendation. The firm’s thesis is based on several factors: first, a moderation in cost growth, with reductions in wages, poultry, electricity, and rent, while oils and grains have returned to pre-COVID levels; second, improved discretionary spending in key states for Collins, such as Queensland and Western Australia, along with the potential for greater digital sales penetration; and third, the scaling of KFC’s presence in the Netherlands, which is expected to enhance long-term margins for KFC Europe.
In its HY25 earnings, Collins Foods Limited (CKF.AX) posted revenue of $703.5 million, up from $695.2 million in the same period last year. The company ended the year with 386 restaurants, up from 374 in the prior year period. It reported net debt of $158.9 million, a decrease of $14.1 million, driven by strong cash flows that facilitated the reduction in debt and enhanced its investment capacity. Net operating cash flow remained robust at $75.3 million, although it was lower compared to the previous year due to a decline in EBITDA. Despite this, the company achieved a strong cash conversion rate of 108%. Its net cash flow came in at $4.6 million.
Collins Foods Limited (CKF.AX) currently offers a fully franked interim dividend of $0.11 per share and has a dividend yield of 3.61%, as of December 25.
