Buy Hold Sell: 7 stocks for market-beating dividends

With the stock market surging to all-time highs and the rally being driven by a narrow slice of the market, one of the unwelcome outcomes has been a falling average yield on the ASX. 

It currently sits well below 4% for the All Ordinaries - about the long-term average - as seen on the chart below. 

As most of you would know, every year we conduct a survey as part of our Outlook Series, where we ask a host of questions, including “What is your favourite income stock?”

Nearly 5000 of you shared your thoughts with us across the Livewire and Market Index platforms, and in this episode of Buy Hold Sell, you’re in for a real treat. 

We’re going to run the ruler over five of your most-tipped income stocks - but there is one small caveat: the stocks must have a higher-than-market average yield. To do that, Livewire's Sara Allen is joined by Michael O'Neill from IML and Ben Clark from TMS Private Wealth.

For good measure, our guests each bring along a stock they think should have made the list, as their top income stock for 2025. 

Note: This episode was recorded on Wednesday, 12 February 2025. You can watch the video, listen to the podcast or read an edited transcript below.

Other ways to listen

• Podbean
• Spotify

Edited Transcript

Sara Allen: Hello and welcome to Livewire's Buy Hold Sell, I'm Sara Allen. As most of you would know, every year as part of our Outlook Series we send out a survey to you guys to ask you the big questions, such as “What is your top income pick?” This year nearly 5,000 of you shared your top picks and today you're in for a treat. We're going to run a ruler over five of your most tipped income picks but with a caveat: they must have above market average yield. Let's face it, that's probably not too hard in this environment.

We're also going to ask our experts for another two income stock picks that should have made the list in their opinion. With so many stocks to cover we're going to crack into it. I'm joined today by Michael O'Neill from IML and Ben Clark from TMS Private Wealth. Thank you so much for joining us, gentlemen.

BHP Group (ASX: BHP)

First up we're going to look at BHP. It's only been in recent years that big miners have paid the big dividends. But it's been a pretty hard year for coal and iron ore, and the BHP share price has been pretty hard hit. Ben, is it a buy, hold, or a sell?

Ben Clark (HOLD): I think it's a hold. So they're on a decent dividend yield, high fours, fully franked. The big swing factor, as we all know with BHP, is what will the iron ore price be over the next 12 months? What will the copper price be over the next 12 months? And that's going to determine that payout ratio, given it is fixed versus profits these days. Great operators, great assets, hard to criticise. I think it's the best in that resource space. But there's not a lot of certainty on the dividend, it could move around, so I'll go hold.

Sara Allen: And what about you Michael, are you holding?

Michael O'Neill (HOLD): Hold. It is the pick of the bunch in terms of the large material stocks. We love the diversification across iron ore, coal, copper, and other commodities. The position on the cost curve is enviable. They've got great assets. But yes, they are still quite exposed to further declines in iron ore prices, with China demand falling and also perhaps still, volumes in China kicking up even further under the new trade tariff policies from the US.

Telstra Group (ASX: TLS)

Sara Allen: I'm going to stay with you. Next up is Telstra which has been long held as a dividend darling even if in the past it hasn't seemed to grow terribly much. But there's some prospect for growth in the future. Is it a buy, hold, or sell?

Michael O'Neill (BUY): It's a buy. So Telstra does have a very leading market position in what is an essential service, and they have a lot of scale. And they have a network advantage in terms of coverage. Notice I say network advantage, not customer service, because we all know complaining about Telstra has become a national pastime. With what we've seen in the past, competitors don't want to return to that period of price wars we had five years ago. And TPG and Optus still need to increase their returns which is running at low single-digit levels.

Sara Allen: What about you Ben?

Ben Clark (BUY): I think it's a buy as well. Tthe earnings seem to have based out. This fractious relationship they have with NBN Co appears to have calmed down. On consensus, you're actually going to see a bit of earnings growth coming. And I think they might find some value in some of the assets that they own, going into this data centre and digital age. This is very long-term. What I would be worried about is some sort of disruption to the way mobile phone networks work. Starlink satellites all over the place and we go onto internet full time but that's a long way off. So I think for now, if you're an income investor, it's a buy.

Woodside Energy (ASX: WDS)

Sara Allen: Okay. I'm going to move on to our embattled energy sector. Woodside has delivered bumper profits in the past few years. It's anyone's guess if it can keep it up in this environment. But is it a buy, hold, or a sell?

Ben Clark (SELL): I think it's a sell. Woodside's got some pretty big CapEx decisions it's going to need to make in the not too distant future. It's had a pretty poor track record of production cost blowouts. I think we're going into an oil and gas price environment which is going to be softer, so obvious sell.

Sara Allen: And what about you Ben?

Michael O'Neill (HOLD): It's a hold. Obviously, great operators in the oil and gas space, more diversified post-merger. I mean, their Tier 1 assets are in declining production profile so their dividends will reflect that and come down. And the one risk we are watching very closely is the risk of further value-destructive M&A given their track record.

APA Group (ASX: APA)

Sara Allen: Okay. I'm going to stick with the energy theme; we're going to talk to APA Group which is facing a similarly challenged environment. Is it a buy, hold, sell for you?

Michael O'Neill (HOLD): It's a hold. It’s the largest gas transmitter in Australia, and electricity transmission as well. They do have good contracts in place so they get paid based on capacity, not volume. And they have some inflation protection built into those contracts which is quite helpful. That being said, they have growth opportunities in electricity, transmission, and hydrogen but those will come with a very high capital expenditure associated. And given their payout ratio is quite high, to begin with, that could result in them needing to raise capital.

Sara Allen: And Ben, what are your thoughts – buy, hold, or sell?

Ben Clark (BUY): I think it's a buy. It's on an 8% distribution yield on an FY26 basis. The company's consistently increased that distribution. I agree, the payout ratio might be a bit high. I think it's got incredibly good assets, Tier 1 assets, that are irreplaceable and will never be competed against. It does have some regulatory risk. But it has, in the medium term, put a bit of that behind it recently, it's come to some good regulatory agreements. I understand it's partly on the nose because of the ESG stuff. But I think gas will be running through those pipelines for decades to come. So I reckon it looks attractive.

Westpac Banking Corp (ASX: WBC)

Sara Allen: So next up we're going to look at a big bank. And it's not Commonwealth Bank just to be clear. It's Westpac, which was forecast by CommSec to deliver a dividend yield of 4.77% for the year. It's the highest yield for one of our big banks. So is it a buy, hold, or sell?

Ben Clark: (HOLD): I'll say hold… just. I'd lean to a sell on valuation basis. If you're looking at it from an income point of view, that the positives with Westpac, the Tier 1 capital ratio is high, the banks have got excess capital at the moment. It looks very sustainable. Short of some sort of house crisis or some bad and doubtful debt provisioning that would need to be done, I think it'll keep paying that out. I don't see a lot of growth in it, I've got to say.

Sara Allen: And over to you, Michael. Is it a buy, hold, or a sell?

Michael O'Neill (SELL): It's a sell. In the last year the underlying earnings in 2024 went down 3%, the stock’s valuation multiple went up 29%. It's very hard to make sense of that. If you can use options you can enhance the yield, that certainly helps. They are operating in a very benign environment with that supporting their earnings. And the one thing that the new CEO Anthony Miller has on his to-do list is their Unite transformation program, which we're quite cautious could run over time and over budget.

Guest picks

Sara Allen: Now I'm going to ask our guests for their own picks. Michael, we're going to start with you. Which stock do you think should have made the top five list?

The Lottery Corporation (ASX: TLC)

Michael O'Neill: The Lottery Corporation. Everyone needs a little TLC - Forgive me. So this is a business that owns exclusive licenses for lotteries that run for 25 years in duration, on average. They achieve revenue growth GDP plus, and they're getting margin improvement because they're increasingly moving to digital. The business separated and demerge from Tabcorp and the new management team have proven that they can execute. So what we're anticipating is that they can get further game changes through, achieve CPI plus price increases, get new and innovative games out there, and also come up with more personalised digital marketing.

Sara Allen: So forget buying the tickets go and buy the shares.

Michael O'Neill: That's right.

Sara Allen: Okay. Ben, your turn. What stock has missed the list?

Transurban (ASX: TCL)

Ben Clark: I've got a pretty boring one, it's Transurban. Boring. But sometimes boring can be beautiful. If you're looking for income you don't want any nasty surprises. I think similar to APA, in some ways, Transurban has a phenomenally attractive suite of assets across this country. I guess in the market size there are concerns around whether they can keep growing those assets. And that might be that time's largely behind them. Those assets are still spitting out very good cash, they pay a yield out of free cash flow. It's well-managed. I would not be surprised if one morning I woke up and there's been a takeover bid for the business, given there are only three or four of these high-quality infrastructure stocks left on our market. I think it's a buy from an income point of view.

Sara Allen: Okay. Stick with boring is beautiful. There you have it ladies and gentlemen, you've got two stocks that you should be watching as well as a bit of an analysis of all your top picks. That's it for Buy Hold Sell today. We hope you've enjoyed this episode. If you want more please subscribe to Livewire Markets. Thank you for watching.