Insights

What are the best dividend shares to buy now for a passive income?

The best dividend shares to buy now are likely to be financially sound and have growth potential that leads to a rising passive income.
The post What are the best dividend shares to buy now for a passive income? appeared first on The Motley Fool Australia. –

little pig piggy banks falling from the blue sky, indicating a windfall of income from ASX dividend shares

Taking the time to identify the best dividend shares to buy now could be a useful exercise for all passive income investors.

After all, the world economy faces a challenging period that could cause disruption when it comes to shareholder payouts.

As such, finding high-yielding shares with affordable dividends that can grow in the coming years could be a sound move. It may lead to an attractive income return in the long run.

Financially-sound companies can make the best dividend shares

The financial strength of a business is likely to have an impact on whether it is among the best dividend shares to buy today. The challenging operating conditions of 2020 could spill over into 2021. As a result, many companies may face threats from weak consumer confidence, rising unemployment and lower levels of business investment that have a negative impact on their financial prospects.

Therefore, buying dividend shares with sound financial positions seems to be a logical approach – especially in the current economic climate.

Companies with low net debt levels, or even net cash positions, and significant headroom when making interest payments on debt could offer greater resilience when paying dividends. Similarly, companies that are well within their banking covenants may be less likely to need to cut dividend payouts in order to satisfy their lenders.

Although assessing the financial positions of companies can help an investor to find the best dividend shares, it is by no means a water-tight method. However, it can significantly reduce the risk of a disappointing passive income through increasing the reliability of dividend payouts in the coming years.

Dividend growth potential over the long run

As well as financial stability, the best dividend shares are likely to offer long-term passive income growth. The scale of monetary policy stimulus enacted over the past 12 months means that higher global inflation could result over the coming years. This may have a negative impact on the spending power of investors who are unable to generate attractive growth in passive income from their portfolio.

As such, buying companies that have an attractive earnings growth profile could be a sound move. Higher earnings may mean they can afford to pay a rising dividend that beats inflation. Similarly, businesses that pay out a low proportion of net profit as a dividend may find it easier to raise shareholder payouts in the coming years.

Identifying companies with high earnings growth and low dividend payout ratios may mean obtaining a lower dividend yield today. Such companies could be in high demand due to their impressive future outlooks.

However, if they deliver strong dividend growth, they could prove to be the best dividend shares available today for long-term investors. They may also produce attractive capital returns, as an improving financial performance generally merits a higher share price.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia’s Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a ‘must consider’ for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don’t miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Click Here For Your Free Stock Report

Returns As of 6th October 2020

More reading

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post What are the best dividend shares to buy now for a passive income? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!