Banks missing from Australia’s best dividend stocks

An analysis for The Australian by Morningstar Australasia has found the best long-term dividend payers actually come from mining, health, technology, retail and investment management – with not a bank among them.

Morningstar’s top 10 ASX 200 stocks that have the best dividend performance for the past decade to September were iron ore giant Fortescue, wealth company Pinnacle Investment Management Group, healthcare IT group Pro Medicus, metal detection and communications technology company Codan, and gold miner Northern Star Resources.

It based its rankings on factors including dividend growth, trailing yields and “dividend payback”, which is how much of the investor’s original outlay has been recouped by the dividend.

Morningstar market strategist Lochlan Halloway said these measures blended growth and value, and “also shows high yields are not always signs of distress”.

Unlike Fortescue, some companies have high dividend yields simply because their share price has slumped dramatically and the dividend is likely unsustainable.

Morningstar also examined the top 10 ASX 200 companies based on total shareholder returns over 10 years. Total shareholder returns capture any dividend paid plus the capital growth of the stock.

Leading the pack is Liontown Resources, which has delivered investors an annualised total return of 68 per cent. Liontown has not paid a dividend but its shares have climbed from 2 cents from 90 cents. Likewise, Capricorn Metals has yet to pay a dividend but has delivered a 64 per cent annualised return.

Meanwhile, rising dividend payer Pro Medicus has also delivered strong capital growth, delivering a total shareholder of 64 per cent each year, followed by gold miner Genesis Minerals (51 per cent).

“This is much more resource-heavy,” Mr Halloway said.

Seven of the top 10 list based on total shareholder returns are mining or mining services companies.

Just two companies made it on both the dividends list and total shareholder returns list: Pro Medicus, where stellar share price and dividend growth overcame a low yield, and Codan, where a surging share price has turned its 91-year-old largest shareholder into a billionaire.

Despite their popularity with investors, no banks made the lists, with the Commonwealth Bank’s 150 per cent share price growth over the past five years nowhere near the rising returns of the top performers.

Betashares senior investment strategist Cameron Gleeson said CBA’s dividend payout had not kept pace with its share price surge.

“CBA’s dividend yield now is below 3 per cent. It’s not really a (high) dividend-paying stock anymore,” Mr Gleeson said. Betashares dumped CBA from its Australian Shares High Yield ETF in July.

An analysis by Betashares found total dividends paid by Australian listed companies dropped by $12.4bn in the past two financial years, from $95.5bn in 2022-23 to $83.1bn in 2024-25.

The proportion of dividends paid by the 10 highest-paying companies fell from 62 per cent to 48.5 per cent in four years, it found, and Mr Gleeson said this pointed to a broadening out of companies paying dividends.

“If you look at the resource sector, over the last three years it’s fallen pretty significantly – nearly 50 per cent drop in the dollar dividend paid by the ASX resource sector, which is both mining and energy,” he said.

“While financials have grown their dollar dividends, the growth in that dividend dollar amount hasn’t been as significant as the growth in the stock prices.”

This week shareholders will receive dividends from Coles Group, BHP Group, Fortescue, Telstra Corp, Rio Tinto, Woodside and Woolworths, with CBA to pay next Monday.

Investors Mutual portfolio manager Mike O’Neill said overall dividends on the ASX were still dominated by the financials and materials sectors. He said people who looked beyond them would find more diversity and companies steadily growing dividends without their share prices reflecting it.

“In many cases you can find higher-quality, lower-volatility businesses – but you have really got to be active,” Mr O’Neill said.

His favoured stocks in this space included Dalrymple Bay Infrastructure, Charter Hall Retail REIT and insurance broker Steadfast Group.

Mr O’Neill also mentioned retailers JB Hi-Fi and Nick Scali, which both made Morningstar’s top 10 dividend-paying stocks list.

He said they were “pretty cheap in 2015 and they had decent dividends”.

“They have been very good performing stocks for the last decade.”

Morningstar’s Mr Halloway said investors could create their own “dividends” by simply selling shares in high-quality growth stocks, rather than just focusing on dividend yield.

“Simply chasing yield risks missing out on strong businesses with low payouts but superior long-term return potential,” he said.

“Conversely, an investor would miss opportunities if they simply screened out high yielders – Fortescue, for example.”

This article first appeared in The Australian as Banks missing from Australia’s best dividend stocks