2023 Recap | ASX Stocks with the Highest Dividend Yields in 2023

Australian firms tend to distribute a larger share of their earnings as dividends, resulting in higher yields compared to many overseas markets. This propensity is partly because many of the companies listed on the Australian Securities Exchange (ASX) are in mature industries such as banking, mining, and utilities. These sectors are known for their consistent profitability and cash flow, leading companies within these fields to favour dividend payouts over reinvestment for expansion.

In addition, Australian investors benefit from a tax system that includes franking credits, designed to prevent the double taxation of dividends. These credits provide a tax offset for shareholders, reflecting the corporate tax already paid on profits by Australian companies, and can be claimed when shareholders file their tax returns with the Australian Tax Office (ATO).

With companies issuing cautious guidance, earnings expectations have been adjusted downward, with consensus forecasts predicting a 5.7% decrease in earnings growth for 2023-24. The expected earnings slowdown suggests that firms may share a smaller portion of their profits in the form of dividends. Nevertheless, certain stocks have maintained robust dividend payments this year.

It's crucial for investors to remember that while dividend-paying stocks can be alluring, they are not without risk. An elevated dividend yield might be a red flag for a company's financial difficulties or an indication of a business in trouble. Therefore, investors should thoroughly assess the financial health and long-term viability of a company to make informed investment choices.