These stocks are listed in Australia and have a dividend yield higher than the SPDR S&P ASX/200 ETF STW (4.41%*), possess competitive advantages (as measured by the Morningstar Economic Moat Rating) and were trading at among the widest discounts to our fair value estimates as of March 7, 2024.

Here’s what our analysts think about the three high yielding stocks, including forecasted dividends.

Dexus DXS

• Price/Fair Value: 0.68
• Morningstar Economic Moat Rating: Narrow
• 5-year average yield: 5.61%
• Forecasted grossed up yield for 2025: 6.9%
• Morningstar Capital Allocation Rating: Standard
• Industry: Real Estate

Dexus is a diversified Australian REIT that generates income from charging rent; managing property for clients; funds management, which typically includes property management and investment management services; and development and trading.

Rent is the biggest revenue driver with the office and industrial divisions accounting for the vast majority of funds from operations. High-quality offices in Sydney dominate, with Dexus having interests in many trophy assets including Sydney’s 1 Farrer Place, and 1 Bligh Street. It also owns or manages a seasoned industrial portfolio, including the massive Dexus Industrial Estate in one of Australia’s fastest-growing industrial precincts, Truganina, Victoria. It has a small retail portfolio, mostly retail sites attached to offices, and a small healthcare portfolio. Dexus has sold stakes in office, industrial and healthcare assets into funds management vehicles that it manages.

Dexus’ narrow moat rests on its its funds management business and its central business district office portfolio. A narrow moat indicates our analysts believe Dexus is able to maintain a sustainable competitive advantage for at least ten years.

Dexus’ funds management business derives the moat from switching costs. This means that there is a high barrier for customers or clients to switch from their product. The group’s wholesale funds management clients face potential notice periods, exit penalties, transaction costs, and tax effects if they switch out of Dexus vehicles.

Furthermore, even if clients exit, someone has to own the properties, and there is generally an incentive for redeeming investors to sell to another incoming investor. It is also worth noting that Dexus’ economies of scale and expertise in property and funds management are competitive advantages, even if those points don’t warrant a moat in their own right. It does add to the appeal, meaning investors will think twice before electing to wind up a fund.

Our fair value estimate is $10.80 per share. Our valuation implies a forward fiscal 2024 distribution yield of 4.4%. We assume office rents are roughly at the lows in 2023 and will gradually recover, about in line with inflation for the remainder of our forecast period. Dexus' stated net tangible assets ("NTA") has declined materially since the pandemic and is now below our valuation.


• Price/Fair Value: 0.86
• Morningstar Economic Moat Rating: Narrow
• 5-year average yield: 4.98%
• Forecasted grossed up yield for 2025: 7.3%
• Morningstar Capital Allocation Rating: Poor
• Industry: Utilities

APA Group is Australia's premier gas infrastructure company. Limited regulation, scale, and a superior skills base help it capitalise on gas demand growth and generate competitive advantages that warrant a narrow economic moat. A narrow moat indicates our analysts believe APA is able to maintain a sustainable competitive advantage for at least ten years. However, gas market reform will weaken its competitive advantages. Fair value uncertainty is medium, as secure revenue is balanced by high gearing and limited transparency over customer contracts.

Infrastructure, primarily gas transmission and distribution, is the core business, generating more than 90% of group earnings before interest, depreciation and amortisation ("EBITDA") (earnings before interest, tax, depreciation and amortisation). The rest comes from part-owned investments and asset management.

The investments division owns stakes in smaller gas infrastructure companies, providing solid returns and giving some influence. The asset management division provides management, operating, and maintenance services to most part-owned companies, leveraging APA Group's skills base to generate good returns outside the regulatory framework.

APA Group's narrow economic moat stems from its unparalleled gas pipeline network, which benefits from efficient scale. Domestic gas markets are served by a handful of pipeline firms, with APA by far the largest. New entrants are deterred by high capital costs and inelastic demand, which would ensure poor returns from entering the market and competing with incumbent operators. Incremental demand growth can be met most cost-effectively by upgrading existing pipelines with, for example, higher compression.

These positive traits are unaffected by gas market rule changes, though the benefit the firm can accrue will likely reduce. A wide moat is precluded, as we lack sufficient confidence that slim excess returns can be maintained over the long term, given unfavourable gas market rule changes, the softening outlook for domestic gas use, and the powerful and concentrated customer base. A wide moat would indicate that our analysts are confident that APA would be able to maintain their competitive advantage for at least 20 years.

Accent Group Ltd AX1

• Price/Fair Value: 0.80
• Morningstar Economic Moat Rating: Narrow
• 5-year average yield: 5.26%
• Forecasted grossed up yield for 2025: 10.3%
• Morningstar Capital Allocation Rating: Standard
• Industry: Consumer Cyclical

You may be familiar with Accent Group’s brands such as Glue Store, Platypus or the Athlete’s Foot. In contrast to many of its brick-and-mortar retailing peers, we think Accent can keep rolling out stores at an above-population-growth pace over the medium term. Although Accent’s store network has expanded rapidly, more than doubling in the five years to fiscal 2023, we don’t see evidence of deteriorating store economics. Accent is disciplined in its approach to new stores, targeting an aftertax return on investment of at least 20%, significantly above our 10.4% weighted average cost of capital, or WACC, assumption.

We think Accent’s rollout will be driven by monobranded stores under its exclusive distribution agreements with trendy labels such as Hoka, and its vertically owned banners Nude Lucy and Stylerunner. New stores will likely be in outer metro and regional areas. While these stores are typically lower turnover, lower rent means that margins are comparable with metro locations. As the store network expands, sales should increasingly shift away from wholesale and toward the higher margin, albeit more capital-intensive, retail channel. Channel mix shift toward retail should see a modest uplift in group margins, to around 11% by the end of our explicit forecast period from 9.8% in fiscal 2023.

We assign Accent Group a narrow moat rating based on its intangible assets, which include strong relationships with leading footwear brands and an extensive store network. A narrow moat indicates our analysts believe Accent Group is able to maintain a sustainable competitive advantage for at least ten years. Long-standing, and in many cases exclusive, distribution agreements with the world’s largest footwear brands, combined with an impeccable track record of favourable contract renewals, give us confidence that Accent can continue to deliver returns exceeding its weighted average cost of capital.

With over 700 stores and more than 20% of all footwear sales in Australia, Accent is a clear leader in a fragmented market. The second-largest retailer in the country is privately held Munro Footwear, with a network of around 300 stores and market share of 8%, followed by Super Retail Group, with 160 footwear stores and 8% share. Nike Australia, through its network of around 50 corporate stores, is the fourth-biggest player at 4% of the market. The remaining 50% of the footwear market is a fragmented mixture of direct-to-consumer global brands and domestic retailers.

*at March 7th 2024.