Chart of the Week: Our top dividend stock picks on the ASX
Highlighting key income opportunities on the ASX.
Mentioned: GPT Group (GPT), BHP Group Ltd (BHP), AGL Energy Ltd (AGL), Woodside Energy Group Ltd (WDS)
This week’s insights come directly from our equity analyst Shaun Ler in the Australian Dividend Outlook and Top Picks 2026 Q2.
Dividend investing remains compelling
Companies on the ASX are likely to continue taking a measured approach to dividends, balancing shareholder distributions against balance sheet stability and the need for future investment. We expect close to 60% of our coverage to increase full-year distributions per share in the fiscal 2026 reporting season, up from 46% in fiscal 2025.
This is consistent with a broader trend of earnings growth. Around 55% are expected to keep their payout ratios flat or lower, suggesting earnings are keeping pace with or outpacing dividend growth.
Around two-thirds of our coverage are expected to raise distributions in fiscal 2027, climbing to 74% in fiscal 2028. Payout ratios are forecast to be around 65% across both years, in line with fiscal 2026.
Utilities, consumer defensives and healthcare are the most likely sectors to generate distribution growth—all three typically have more stable earnings. Distribution growth in energy and materials looks more moderate, though commodity price increases offer upside. Technology firms treat distributions as a low priority.
The below chart highlights our top dividend picks grouped by sector and sizing based on listed market capitalisation.
Diversification and quality drives our dividend picks
The ASX skews heavily toward financials and materials, but we’ve found attractive yield ideas beyond those two sectors and built the list with diversification in mind. Ten sectors make the cut, most contributing two or three names each, with no reference to index weights. Technology is absent, where yield is generally scarce, and healthcare exposure is also limited.
By spreading holdings across sectors and thematic coverage, we seek to manage concentration risk and smooth dividend volatility. We seek both income generation and growth opportunities from these selections.
Moats remain a defining feature of our pick list. The latest list contains more moat-rated names than the previous quarter’s. Competitive advantages matter to income investors because they underpin the durability of cash flows backing distributions. Even so, missing a moat rating doesn’t rule out a stock.
A strong balance sheet, supportive valuation, and a steady dividend track record can still build a credible case. Where a moat is absent, we instead look for dependable cash generation and a clear willingness to return capital to shareholders, as with AGL (ASX.AGL), BHP (ASX.BHP), GPT (ASX.GPT), and Woodside (ASX.WDS).
