Livewire readers’ top 10 dividend stocks (and 10 more that are underappreciated)

Just a few years ago, inflation was low and rates bordered on non-existent. Fast forward to today, and both of those things have turned. Inflation is high and sticky, while rates have soared.

This wind shift has affected every corner of the investment landscape. Few areas have been as affected as income investing, which levers directly off the risk-free rate. 

Cue Livewire's Income Series, which is back for another year in 2023. 

Throughout the series, we've heard from a raft of professional income investors - from fixed income to equities and everything in between. That's really at the heart of what Livewire is all about - the transfer of knowledge to make you more successful investors.

But Livewire subscribers also love hearing about their fellow subscribers! This mind hive is an equally important part of Livewire, and we like to think we've created a bit of a community to support it.

So, as part of the Series, we surveyed 1002 of you, in the hope of identifying your views on income investing. 

In this wire, I'll share and discuss your top 10 stocks for income, followed by your top 10 under-appreciated income stocks. 

Top 10 stocks for income

BHP Group (ASX: BHP)

It should come as no surprise that BHP was voted your #1 income stock – and by an enormous margin of 31 votes. 

The 'Big Australian' currently boasts an 8.53% dividend yield. This is after the company slashed its interim dividend by 40% in March, amid reduced reduced earnings and investment. 

On the capital side, the stock has returned 12.11% over the past 12 months and 0.61% in 2023. 

Macquarie has both earnings multiples and free cash flow improving over the coming years. The broker has the former projected at 5.2x in 2023, 5.0x in 2024 and 5.8x in 2025, while free cash flow yield is projected to hit 4%, 11%, and 5% respectively.  

There are tailwinds forming. Chief of those is China's reopening and the positive effect that has on the outlook for iron ore. According to Randal Jenneke, BHP is well-positioned for this. 

Copper is a hot commodity at the moment, yet finding pure copper plays isn't easy. Andrew Hines, head of research at Shaw and Partners, reckons BHP, with its Escondida copper mine in Chile, is a good proxy to gain some copper exposure to the metal. 

Commonwealth Bank (ASX: CBA)

Commonwealth Bank is without question one of Australia's dividend darlings, having declared a dividend every year for the past 20. 

At present, the bank has a dividend yield of 4.12%. In February, the bank announced an interim dividend of $2.10 a share, an increase of 35 cents on the prior corresponding period.

The share price has range traded through 2023 and currently sits just in the red at -0.73%. 

The company remains in a strong position despite a challenging macro backdrop. In its half-year update, CBA announced a 12% lift in operating income to $13.59 billion, while net interest income increased 19%. 

Stepping back, Macquarie maintains a NEUTRAL rating on the sector, stating that: "While the near-term outlook for bank earnings appears challenging, recent pricing trends suggest that the rate of margin decline has started to moderate. Furthermore, following ~5-10% consensus downgrades and rebased margin expectations, the risk to earnings has reduced (we are now only ~1-4% below consensus in FY24E)."

Macquarie Group (ASX: MQG)

Macquarie Group boasts the best management in the game, according to research from Market Meter. Indeed, income investors will be pleased with the overall trajectory of the company.  

Last month, the company announced a 10% lift in its full-year net profit to a record $5.18 billion, and a 40% franked final dividend of $4.50 per share; a 29% improvement on the FY22 dividend.  

The share price, meanwhile, has done 10.85% over the last 12 months and 8.88% this year alone. 

And in a tick of approval on both the capital and income sides, Macquarie is one of the long-term portfolio positions in Don Hamson's income fund at Plato Investment Management. 

Top 10 underappreciated income stocks

The Livewire audience loves unearthing hidden gems and the list below highlights the most-tipped stocks, the number of times they were nominated, the 1-year forward yield and the current broker consensus (please scroll to the right for the full data set). 

If you think there is a great income stock that has been missed, make sure to share it in the comments section below. 

*The data was sourced from Reuters, with special thanks to Thomas Wegner from Lonsec for helping to gather it.