Morningstar’s top 11 fully franked dividend picks for the end of the year

If there’s a combination of words that will almost universally pique Australian investors' interest, it’s “fully franked dividends”. The concept of franking credits is a quintessential part of retirement income strategies, while many other income-focused investors find the tax implications alongside the dividend income valuable.

Morningstar’s new report exploring top dividend picks is a timely offer in the current market. Of the list, 11 are fully franked, five offer some level of franking, and seven have no franking. Morningstar’s list factors fundamentals – you want substance to ensure those dividends will continue long into the future.

At a point where share market valuations have been largely high, dare we say overvalued in some cases, it’s pushed dividend yields lower (though it’s easy to forget this when many companies offered increased distributions last August). Coming out of reporting season, guidance for future earnings was conservative, with some of the bigger players like CSL and Commonwealth Bank offering below expectation earnings projections.

As inflation pushes upwards again and interest rate expectations shift – most economists are tipping only one more cut next year – investors might be taking a closer look at how to bolster their income further, and this list could be a useful starting point for research. For the purposes of this article, I’ll only focus on the fully franked dividend picks and take a closer look at a few of these.

Dividend projections

Shaun Ler, Equity Analyst Diversified Financials for Morningstar, said of the year to date;

“ASX dividend yields generally sit above those from fixed income, which is normal given equities bring increased risks. But this relationship has changed since mid-2023.”

He credits the rate cycle and consumer confidence with driving stronger risk appetite into equities, and, in turn, reducing distribution yields. As of September, Morningstar’s data indicated that the dividend yield on the S&P/ASX200 Total Return Index was at its lowest point since 2021. However, he was more optimistic about the outlook ahead.

“We forecast about 64% of companies we cover to raise distributions in fiscal 2026 and 78% in fiscal 2027,” he said, highlighting that he expects distributions to generally rise in utilities, real estate, financial services and consumer cyclical sectors in the coming year, with the highest yields in energy, utilities and real estate.

He added that growth-oriented businesses tend to focus their earnings back into growth and offer lower dividends – technology and healthcare being two examples of this and something for investors to be conscious of if investing for income.

The list of fully franked dividend picks

Scroll across to see Market Index's broker consensus tool ratings. Source: Dividend list and yield projection from Morningstar’s Australian Dividend Outlook and Top Picks 2025 Q3. Price and Price/Fair Value based on Morningstar data at 18 November 2025. Market Index broker consensus data as at 19 November 2025.

There are some unsurprising dividend staples in the list, the likes of Woolworths and Telstra standing out. If you add in names that aren’t fully franked, ANZ also joins the list.

The two picks offering the highest yield projections for FY26 are Viva Energy (ASX: VEA) and Woodside Energy Group (ASX: WDS). This is in keeping with expectations that energy will be one of the highest yielding sectors – this is despite other challenges.

Both stocks are veering towards undervalued based on Morningstar’s projections and also rank as a BUY on Market Index’s broker consensus tool.

Morningstar has previously nominated Woodside as a top undervalued pick, with analyst Mark Taylor seeing upside for the business from the need for significant hydrocarbon investment and continued oil and gas demand.

Yarra Capital Management’s Marcus Ryan also nominated it as an energy pick in a recent episode of Buy Hold Sell. He cited the quality of the oil and gas assets, the strength of the management team and the future outlook for LNG as his rationale.

“If you’re prepared just to look forward three years, the stock is trading on an implied free cash flow yield that’s double-digit. So, we do feel as if patient investors will be rewarded,” he said.

Morningstar’s Taylor also sees potential for improvement in Viva Energy, noting “we believe the transition of Express stores into the OTR format will underpin stronger sales growth and margins over time.”

Earlier this year, Lazard Asset Management’s Tim Zhao pointed to both Woodside Energy and Viva Energy as energy names that could stand out. He sees Viva Energy as a turnaround story.

“We anticipate improved profitability as network costs are rationalised and the on-the-run network conversion lifts per-store earnings, implying an EBIT multiple of less than 6x at current prices,” he said.

Another one to watch is Steadfast Group (ASX: SDF).

Like Woolworths and ASX, it’s not an extraordinary yield and stands below 4%, but Morningstar’s Ler notes he “expects their yields to be relatively stable, underpinned by their respective economic moats and low or medium uncertainty ratings.” Consistency is, after all, important when it comes to using dividends as part of an earnings strategy.

But what makes Steadfast Group interesting to look at here is that it ranks as a STRONG BUY on Market Index’s broker consensus tool and is the only one of the picks to hold this rating.

Earlier this year, Livewire’s Carl Capolingua ranked it as #12 on the most consistent ASX dividend stocks.

IML have been a vocal backer of Steadfast on Livewire across this year, with Joshua Freiman pointing to it as a standout in the insurance brokerage space.

“Plenty of levers to grow earnings without taking the balance sheet risk you face with other financials like banks and insurers,” he said.

Michael O'Neill noted it has been a holding since the 2013 IPO.

“It’s grown earnings and dividends at a compound rate of 13.5% since its IPO. It’s dominant in Australasian broking and underwriting; they get 95% retention in broking to their SME clients, so it’s a very stable business, and they grow organically, and through acquisition,” he said.

Other partially franked names on Morningstar’s radar

Outside of the fully franked list, Morningstar also tipped some names with partial franking.

These included: ANZ (ASX: ANZ), APA (ASX: APA), Sonic Healthcare (ASX: SHL), Aurizon (ASX: AZJ) and Spark New Zealand (ASX: SPK). The yield projection for APA Group was the highest of these, at 6.6% for FY26.

By contrast, Atlas Arteria (ASX: ALX) was the top projection in those that don’t offer franking, with a projected yield of 7.6%.

Dividend hunting in the coming months

If you’re looking for new additions to your dividend strategy, Morningstar’s list might offer some starting food for thought.

As you hunt, it’s worth remembering a few things:

1. Highest yield doesn’t always mean the best quality, so don’t forget to consider fundamentals.
2. Consistency and sustainability: some companies always pay out, others might only pay dividends sporadically. If dividends are a critical part of your strategy, consider the long-term track record and the dividend payout ratio. Consider whether the company has the fundamentals to keep paying out into the future.

Finally, while franking holds a number of benefits, a lack of or only partial franking shouldn’t necessarily deter investors from a stock if it has strong fundamentals, consistent dividends and earnings growth and still meets with their overall strategy. It’s something to consider when researching dividend picks for your portfolio.

What are your dividend picks? Let us know in the comments.