Buy Hold Sell: 5 ASX names built for income

In this income-focused episode of Buy Hold Sell, to celebrate Livewire’s 2025 Income Series kicking off, we’re tackling one of the most beloved – and fiercely defended – corners of the Australian market: fully franked dividends.

To help make sense of the dividend landscape in 2025 and beyond, Livewire’s James Marlay is joined by two seasoned pros: Peter Gardner from Plato Investment Management and Hugh Dive from Atlas Funds Management.

Together, they explore where the best income opportunities lie, what traps to avoid, and how to hunt for companies that deliver both yield and capital growth.

You’ll hear why traditional dividend darlings like CBA and Wesfarmers might not be pulling their weight anymore, why payout ratios matter more than ever, and how franking credits can offer crucial insight into a company’s financial health.

Plus, we get their verdicts on some of the most consistent dividend payers on the ASX – including Soul Patts, Charter Hall, and Steadfast Group - before each guest shares their top pick for income in 2025.

If you’re serious about dividends, you won’t want to miss this one. 

Please note this episode was filmed on 16 July 2025.

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Edited Transcript

James Marlay: Hello, and welcome to Buy Hold Sell. My name is James Marlay, and as part of our Income Series we've got a couple of special episodes focusing on that much-cherished part of the Australian market, those fully franked dividends. And to help me and you get our heads around the dividend environment in 2025, I'm joined by Dr. Pete Gardner from Plato Investment Management and Hugh Dive from Atlas Funds Management. Gents, thanks very much for coming on.

Hugh Dive: Thanks.

Peter Gardner: Thanks for having us.

Finding dividends in 2025 and beyond

James Marlay: Now, before we get into our stocks today, a couple of tips to help you level up your income game. So we'll get a bit of a lay of the land and then we're going to get into some really consistent dividend payers.

Pete, I'm going to start with you. For those income-hungry investors, what are the important points they need to know about finding dividends on the ASX in 2025 and beyond?

Peter Gardner: Okay. Well, one of the challenges of investing in income on the ASX is the low level of diversification when you look at the really big dividend players. A lot of the really big dividend players are either in the financial sector or they're in the mining sector. And so we think investors need to beware of just picking a few big dividend stocks and then not having much diversification in their portfolio, because then you miss out on some of the growing areas of the market as well, to grow your capital.

The other thing to be wary of is that the income environment is changing a little bit, and some of the stocks out there, like CBA or Wesfarmers, have rallied quite a lot and so they're no longer high-dividend yield stocks. They're actually below market-dividend yields. And so potentially investors that hold those stocks may want to rotate if they're looking to increase their yield.

James Marlay: Yeah, it's been an interesting dynamic, that one. Hugh, anything you want to add to what Pete said about the environment?

Hugh Dive: Yeah, that's a great point about traditional dividend stocks are anything but now. But three things. If the dividend is really high, and it seems too good to be true, it generally is. Secondly, think about where the source of that income is coming from with those dividends. So you've got to think a bit further than one year ahead. If it's a company that is based on a commodity where it's looking a bit weak and a bit sicker, they've got a large amount of CapEx plans, there's a chance that dividend's going to be cut. Think, for example, Fortescue; lots of green energy dreams, iron ore is looking a little bit sicker. How sustainable is that dividend. And thirdly, think about does the company have operations with the United States? Are they impacted with tariffs at all? I'm thinking over the next year, companies that have operations in the United States or impacted by Trump's ever-changing tariff policies, they're going to be very conservative and are going to withhold capital just due to the uncertainty in the environment that seems to change every week.

So, these are the three things I'd recommend for the next year.

James Marlay: Okay. Good points. For both of you, I'm keen to understand a bit about your dividend strategy, because everyone has a different approach to doing it. Some are harvesting for high yield, some are looking for growth over time. Hugh, what's your approach?

What’s your dividend strategy?

Hugh Dive: We have two funds. We have a buy-write strategy, the Atlas Australian Equity Income Fund, which buys stocks, looking for them to go up and then selling covered calls. Secondly, we have a managed account with Australian Equity. The common focus through all of our products is income. We take the view that in a good year you get 9% total return in the ASX. If you can get 5%, you're halfway there.

Secondly, dividends. Why I like dividends is that when market corrects, they provide an airbag. If stocks are going down quite sharply, at some stage someone's going to step in and buy a Transurban because its yields on 6-7%. We saw that in March 2020. A company such as Xero, that doesn't pay a dividend, doesn't really have that sort of airbag.

Thirdly, as investors, we have a limited look into a company's financials. We get financials twice a year, or in some cases four times a year. We don't get to see as much as the directors do. For me, one of the things I first look at a company is are they increasing the dividends? Because that's a sign to me that things are quite rosy. It's an earnings quality signal. It's much more powerful if they're increasing the dividend than what a CEO may be saying. It can have great outlook statements, or even EPSs, which can be manipulated by CFOs and restated later. Once that dividend's hit your account, it can't leave. So it's a much better earnings quality signal.

And fourthly, we're looking at franking credits. So no CFO is going to pay more tax than they need to. If that franking credit balance is growing, it's a sign that they're making money, they're paying taxes on it. OneSteel, before it fell over, were paying unfranked dividends. So look, companies that should be paying franked dividends that are not, that's a sign that there's a problem with their accounts. Similarly, Babcock & Brown and Orica were paying unfranked dividends before they fell over. So it's a bit of an earnings quality signal.

James Marlay: Yeah, interesting. Pete, Plato, the godfathers of monthly income from dividends. Tell us a bit about the strategy, what you're trying to achieve.

Peter Gardner: So our strategy has two simple aims. One is to deliver more income, not surprisingly, from the market, and also the other one is to outperform the market on a total return basis, including franking credits. And so our investors that we're looking to target for this fund are retirees that are on zero tax. So the first thing that's worth noting about what we do is we manage all our decisions based on an after-tax basis for a zero-tax investor. So similar to Hugh, we really value franking credits in that regard.

But in terms of us trying to also increase the total return of the portfolio, it's worth noting that a big part of our strategy is trying to avoid dividend traps. So we don't try and invest in companies just because they've got a high yield, if their capital's going to drop as well. So we're going to avoid dividend traps, and we're also looking to avoid companies with a high level of red flags as well. So we're looking to grow the capital so that your income can increase over time as well.

Dividend growth and yield size

James Marlay: Okay. Well, let's touch quickly on that topic. How do you balance growing dividends versus looking at the absolute size of the yield? There is a bit of a trade-off there, I reckon.

Peter Gardner: So the first thing, similar to what Hugh said previously, is that if a stock is trading on a really high historical yield, you've got to look at what the forward yield is going to be, because the easiest way for stock to be on a high historical yield is if the share price has dropped. So if the share price has dropped 50%, the yield's then doubled. And so you want to look at forward yields, not historical yields.

James Marlay: They're almost worthless, those historical yield numbers, aren't they?

Peter Gardner: I mean, they do sell you something in terms of what their stock could deliver in good times. But for example, in 2022 when the oil prices were super high and Woodside were achieving huge yields, it wasn't surprising as the oil prices dropped that their yields were going to drop as well, because the price had reflected that already.

Hugh Dive: I think around that time it was trading at about 12% yield.

Peter Gardner: Yes, exactly.

Hugh Dive: Which is a clear sign that they weren't going to achieve that in the future.

Peter Gardner: Yeah, that's right. And so you want to look at forward yields, not historical yields. But for us it's more of a balance in terms of whether you want dividend growth versus high dividends. We don't want to only invest in dividend growers and therefore end up with a low current dividend yield. But similarly, we don't want to invest in all high-dividend yields and then get none of that dividend growth. So for us it's about balancing it and looking at what the market is expecting for those dividends going forward.

James Marlay: Hugh, absolute yield versus growth, what are you looking at?

Hugh Dive: Very much prioritise growth. We want to be growing the dividend yield. Similar to Plato, we have a lot of retired investors that like to maintain that purchasing power. But then also back to what I was talking about, earnings quality signal. I like that growing, because that's the window into a company's psyche. If the bondholders are hammering at the door, they're not going to be increasing that dividend. So that increase of that dividend, it's truth. Whereas CEOs can give you great outlandish positive outlook statements, and that's a better sign that a company's in rude financial health. Bondholders aren't screaming, banks aren't asking for their money back, it's a better earnings quality sign.

James Marlay: Okay, great. Well, we're going to get into some consistent dividend payers in a moment, which I think is almost the holy grail. Just keep them coming. But before we do dive into the stocks, give our audience a tip on what to look for to find consistent dividend payers.

Consistent dividend payers

Hugh Dive: Okay. There’s a few things we're looking for is we like to invest in companies which have been established, been through a range of cycles and have paid dividends over time. Good times don't always last forever. We like to see how they can deal with difficult environments.

Secondly, we don't like to invest in companies that pay over 80%. We have a payout ratio that has their earnings per share, their dividend per share divided by the earnings per share, just because things change, and if you're paying out too much of your earnings, then there's a chance when things change, you're going to have that cut. Because generally we take the view, similar to what Peter said, is when a company cuts that dividend, often the capital can fall much more than the cut. We saw that, say, with Telstra in 2017 when they cut their dividend buy 10, 12 cents. We saw a massive falls there. So you don't want companies that cut dividends.

James Marlay: Pete, same for you? Consistency, what are you looking for?

Peter Gardner: So similar to what Hugh's saying in terms of an individual stock level, but I'm going to push back a little bit, because I think for investors, consistency is more about what their total portfolio is doing. And so sometimes when you only invest in consistent dividend payers, you might miss certain areas of the market that are delivering good yields. So for example, if you're only looking for consistent dividend yields, you're probably not going to invest in any mining stocks because they're more cyclical, their dividends are going to go up and down dependent on the cycle.

And so what we're looking to do in our portfolio is have a good diversification, invest in various different sectors so that at an overall portfolio level, we're looking to get both consistent income and consistent growth as well.

James Marlay: Okay. Well, let's get into a bit of Buy Hold Sell with some consistent dividend-paying stocks. Now, the stocks we're going to talk about were pulled from some analysis done by my colleague, Kerry Sun, and he went back to find the companies with the longest track record of paying dividends that have not been cut, and in some cases have either been increased in the consecutive year. So, top of the list is Soul Patts, nearly a quarter of a century of growing or stable dividends. Pete, I'll start with you. Buy, hold, or a sell?

Soul Patts (ASX: SOL)

Peter Gardner (SELL): It's a sell for us, unfortunately. While we think Soul Patts have done an incredible job over the last 25 years of increasing their dividends, for us when you look at the most recent period, their stock price has gone up significantly but their earnings forecasts haven't, for us, and so we think it's getting a bit expensive. Its PE is around 25 at the moment, yield of just 3.4%, and so we think there's other better areas of the market.

James Marlay: Okay. Hugh?

Hugh Dive (SELL): Yeah, I agree. It's a sell. The yield's too low. The Brickworks acquisition or de-merger, whatever it is, was quite interesting. The earnings future look a bit grim and the increase is relatively low, so we wouldn't be owning that in the portfolio.

Charter Hall Group (ASX: CHC)

James Marlay: Okay. Let's go to property REITs, Charter Hall. It's had a cracking 12, 15 months. Buy, hold, or a sell?

Hugh Dive (SELL): It's had a great 10 years in growing their dividends, but it's just far too expensive for us. It's trading at about 2.4% yield. They'll do relatively well if we do see big falls in interest rates, revaluing up their portfolio, but just a little bit too expensive for my tastes.

James Marlay: Okay. Pete, buy, hold, or a sell on Charter Hall?

Peter Gardner (BUY): I'm going to go the opposite and go for a buy for that one, just to be different. So with Charter Hall, obviously they suffered in 2021, 2023 as interest rates were expected to go up and then did go up over that period. They're a property developer, so interest rates going up generally isn't a good thing. Whereas now, as Hugh mentioned, we're in an interest rate going down cycle, and so that's generally good for property developers. And so we think they've got a little bit more area to run. I agree with Hugh, they are looking a little bit more expensive, but as interest rates are falling, that should be a tailwind for the business.

James Marlay: Okay. Let's go to our favourite barbecue topic, housing, mortgages. Australia loves them. Steadfast Group, buy, hold, or sell?

Steadfast Group Ltd (ASX: SDF)

Peter Gardner (HOLD): So Steadfast is another company that's done very well over the years in terms of increasing their dividends. It's a hold for us overall, and that's purely just because its valuations continue to go up. So it's relied on taking over other businesses in order to grow its earnings. So growing by acquisition. Those opportunities are seeming to reduce. There's been less of that acquisition from them in the last couple of years, but you're assuming quite a lot of those acquisitions to grow its earnings based on the current share price. So it's a hold for us. We like it, but at potentially a cheaper price.

James Marlay: Aggregating in mortgage brokers. Buy, hold, or a sell?

Hugh Dive (HOLD): Agree. That whole roll-up strategy, they work very well, particularly in the early parts of the market. Hold. It's a great company, but I'm a bit wary of that roll-up strategy, particularly coming towards the end. Because that whole PE arbitrage of if you're trading on a PE of 15, you're buying business of eight, it looks great. If you have a couple of acquisitions that don't work out well, suddenly the wheels fall off.

Chorus Ltd (ASX: CNU)

James Marlay: Okay. Last of our consistent dividend payers is Chorus Group. Buy, hold, or a sell?

Hugh Dive (SELL): Well, I think they'll be able to maintain their dividend, but I wouldn't own it. It's a regulated utility in New Zealand. There's very limited opportunity to grow. They've got a great network of fibre-optic cables, but to me it looks a little bit like the NBN. It could end up being this big lemon of a network. We could see wireless things, or something like Elon Musk's Starlink that could really damage that thing. The dividend's not going to grow. It probably won't fall, but looking further ahead, the future looks very uncertain.

James Marlay: Okay. Utilities. People generally like them for their consistency. Buy, hold, or a sell on Chorus?

Peter Gardner (HOLD): For us, it's another hold. Again, similar to what Hugh's saying. But the other thing worth noting with Chorus is that because it's a New Zealand stock, it doesn't pay franking. And so it's on a 6% cash yield, but that's all you're going to get for investors, which is not too bad in the current environment, but it's probably, as Hugh said, not going to grow very much from here. And so, yeah, it's probably not enough to get us in at this point.

Guest picks

James Marlay: Now, it's been a bit tough to squeeze a buy out of you two dividend detectives, so let's hear what you do like. Pete, I'll start with you. What's your consistent dividend pick?

Ventia Services Group (ASX: VNT)

Peter Gardner: So we like Ventia Services, which is a fairly small company, but it's a services company that deals with infrastructure. And so rather than being a mining service company that goes up and down with a cycle, most of its customers are pretty stable.

Now, it had a challenge back in December last year when the ACCC brought proceedings against it for some defence monopolistic behaviour from them with their defence contracts. And so there was a bit of a worry in the market that they would lose some of those contracts going forward. But at the moment, that seems like it's okay. They haven't lost any of those contracts yet. Their share price has rallied to be above now where it was trading before then. And so we like Ventia. It's a yield of 5.1%, but with good growth over the next few years, it should increase that going forward.

James Marlay: Okay. 5% dividend yield, growth in the bag. Sounds pretty good. Hugh, what's your pick to do better than Pete's?

Hugh Dive: I'd like to give you a pick that'll do better than Pete's and one which we would avoid like the plague, which is a well-loved dividend player.

James Marlay: All right. I like that.

Sonic Healthcare (ASX: SHL)

Hugh Dive: So one we really like is Sonic Healthcare. World's largest listed pathology player; number one in Australia, number one in Germany, Switzerland, number two in the UK, number three in the USA. Benefits from an older sicker population, doctors wanting to go against malpractice and just ordering test after test after test. And it's one of the few companies that I can see real benefits from AI. In the recent reporting season, Pete, you probably saw, lots of companies with the most tenuous connections to AI, including, I think, Fortescue might have an AI company. With pathology testing on CT scans, brain scans, melanomas, some of the testing that is coming out is much more accurate than doctors and just can really bring down the healthcare costs. They've had a great record of increasing their dividends every year since 1994. A great healthcare company, trading on a 4.5% yield that's growing very rapidly. Payout ratio of 60%, which we like.

James Marlay: Safety number.

Hugh Dive: Safety number. So we really like that company, and it's different to a lot of healthcare companies that have to spend billions of dollars in R&D. Pathology companies don't have to do that.

James Marlay: Okay, very good. You mentioned one to stay away from. Let's finish on that note.

Telstra Group (ASX: TLS)

Hugh Dive: One to stay away from. A very popular pick, and probably sitting in a lot of income portfolios, is Telstra. Up 33% in the past year, Australia's favourite Telco, but as a dividend payer, it lives beyond its means. It pays out much more than its earnings. It pays out about 110% of their earnings. If you look closely at their cash flow statements, not the glossy hand-out presentation of their heavily adjusted, they borrowed a billion dollars last year to pay for their dividend. That was much greater than their free cash flow. They borrowed again in 2023. The debt load's been going up. Ultimately, companies can do that for a little while, but they can't do that forever.

You probably remember, it was in 2017, they were paying 31 cents a dividend, then they cut it to 21 cents. There was a huge fell out of bed. I think it's very much a risk of that. They're not retaining enough money to pay for their CapEx. So I think that's likely to be a dividend doing a cut in the near future, and it'll be bad for a lot of people that have it in their portfolios.

James Marlay: Well, that's why your phone bill's going up, Hugh. Folks, I hope you got a few helpful tips from our two income experts on what to look for in 2025 and beyond with your income stocks. Remember, this is part of our Income series. Check out the Livewire website and our YouTube channel, we're adding fresh content every week.