TOL - 16th Jun, 2026
The best ASX dividend stocks in 2026
High yield, high risk, low return. Most dividend investors make the same mistake. These stocks delivered the best risk-adjusted dividends.
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Welcome to the third annual edition of this research. Why a third edition? Because in my 30-plus years in the industry, I've found that for too many investors, dividend yield becomes the sole objective – and in pursuit of that objective, they endure capital losses that dwarf the dividends collected.
As with previous editions, this year's methodology looks past straight dividend yield to actual risk-adjusted total returns – because without a consideration of risk, returns are meaningless. The central contention is this: all investors, regardless of their income goals, are better served by focusing on quality companies that are likely to grow their earnings. Stronger earnings growth is always preferred, but for those who want income, the sweet spot is companies that grow their earnings and return a meaningful proportion of those growing earnings as franked dividends.
It’s exactly that sweet spot I aim to uncover here.
Each year, my research has grown in both scope and analytical rigour. In 2024, I covered the ASX Top 50, and last year expanded to the Top 100. This year, the universe stretches to the full ASX 200 plus every ASX-listed income and dividend-focused ETF for good measure – 287 securities in total. The analytical framework has been upgraded too. Alongside the Sortino Ratio that has anchored this research from the start, I've introduced two drawdown metrics to give investors a fuller picture of the risks experienced by owning stocks in the universe. I've also added 5- and 10-year lookbacks to the previous 20-year anchor.
One thing before we dive in. Recent Federal Government changes to capital gains tax and negative gearing rules have altered the investment landscape for Australian investors in ways that may make dividend-focused strategies more attractive than they have been for some time. I wrote about this in detail here. It's worth a read before acting on anything you find in this research.
What makes a great dividend stock?
New readers to Best ASX Dividend Stocks will benefit from a quick grounding in the concepts that underpin this research. Returning readers – feel free to skip ahead to the Results section.
Dividend: A payment made by a company to its shareholders, typically from profits. Usually expressed in cents per share.
Dividend yield (DY): The annual dividend per share divided by the share price. If a stock pays $0.50 per share and trades at $10, the yield is $0.50 / $10 = 5% p.a.
Franking credits: Under Australia's dividend imputation system, companies pay tax on their profits before distributing dividends. Shareholders who receive franked dividends get a credit for the tax already paid. A fully franked dividend is worth more in after-tax terms to an Australian investor than an unfranked one of the same dollar amount.
Grossed-up dividend yield (GUDY): The dividend yield adjusted for franking credits – the true after-tax yield comparison. A fully franked 5% yield is equivalent to a pre-tax yield of approximately 7.1% for a shareholder on the top marginal tax rate. GUDY is the correct metric for comparing dividends across different franking levels.
GUDY = DY × (1 + Franking% × 30/70)
Now, here's where most investors go wrong. Consider a stock that five years ago was trading at $10 and which has paid $0.50 in dividends each year. The stock is now trading at $2. The investor has collected roughly $5.35 in grossed up dividends but has lost $8 in capital value. It may have felt like the investor was earning a healthy dividend return during the period, but they're substantially worse off in dollar terms, and even worse off after accounting for inflation and opportunity cost.
This is the dividend trap – and it's more common on the ASX than most investors realise. The best defence investors have against falling into the dividend trap is earnings growth. Companies that consistently grow their earnings tend to grow their share prices – and the best of them grow their dividends too, compounding both income and capital over time. This is why this research focusses total risk-adjusted return, not just the stocks with the highest yield.
Risk-adjusted return: measures how much return an investment generates relative to the amount of risk taken to achieve it. It allows comparison between investments with different risk profiles, helping investors assess whether higher returns justify the higher risks involved.
The finance industry's preferred measure of risk-adjusted return is the Sortino Ratio. It's similar in concept to the better-known Sharpe Ratio but superior for equity analysis because it penalises only downside volatility. This means it takes into account variance in returns during periods where an investment underperforms, while leaving upside months untouched. A stock that has high upside volatility should not be punished – it’s the downside volatility we’re trying to identify and avoid.
I'll leave the investigation of how Sortino Ratio is calculated to your own AI-powered endeavours. Note for now that in this research the minimum acceptable return (MAR) is 6% p.a. — an opportunity cost-based hurdle rate for determining what constitutes an adverse return, and a typical benchmark for equity investments. I have chosen to use monthly performance data to help investors understand the volatility within the 5-, 10-, and 20-year lookback periods.
Interpreting Sortino Ratios:
- >=1.0: The stock delivered more monthly returns above the MAR than below it. This is genuinely a good risk-adjusted performance during the lookback period.
- <1.0: The stock delivered more monthly returns below the MAR than above it. Essentially, the downside risk was greater than the reward achieved.
- Higher is better: The higher the ratio, the better the risk-adjusted return relative to peers.
New this year
Scope: This year's study covers 287 ASX-listed securities: the full ASX Top 200 (restricted to stocks currently paying a dividend) plus every ASX-listed income and dividend-focused ETF. The S&P/ASX 200 ETF (STW) is included as the benchmark for the universe. Three lookback periods are used: 20 years (same as last year = long term performance through several market cycles), 10 years (medium term), and 5 years (short term).
Drawdown metrics: Two additional metrics appear in this year's tables:
- Maximum Drawdown: the largest peak-to-trough decline in a stock's cumulative total return over the lookback period. It's the worst-case experience for a buy-and-hold investor who held through the period.
- Average Drawdown: the average severity of all individual drawdown episodes over the period. It’s a measure of how deeply the stock tended to fall from its highs before recovering.
Together, these two metrics tell you not just how well a stock performed, but how rough the ride was along the way. In both cases, lower is better.
But consider that when share markets take a big hit (e.g., during COVID), the vast majority of stocks are going to suffer – meaning maximum drawdowns are often roughly consistent among stocks and can usually be traced back to the same market moving event. This makes average drawdown so valuable. It says: accounting for the times when everything went down, what did a stock’s typical pullback look like?
Imagine two stocks both have a 20-year Sortino Ratio of 0.50. Stock A's maximum drawdown was –25% and its average drawdown episode was –8%. Stock B's maximum drawdown was –75% and its average drawdown was –22%. For most investors, Stock A is meaningfully preferable – but the Sortino Ratio alone didn’t tell you that.
The results
20-year lookback: Long-run verdict
The 20-year results span two decades of ASX history – the GFC, the sovereign debt crises of the early 2010’s, Trump vs China in 2018, the COVID crash, Russia vs Ukraine, the post-COVID rates lift off, Trump vs The World in 2025, and Trump vs Iran. Any stock that performs well across this canvas has genuinely earned its place!
Our benchmark STW posted a Sortino Ratio of 0.1440 over 20 years, a CAGR of 8.34%, and a GUDY of 5.69%. Both the CAGR and GUDY are respectable – the ASX 200 has been a decent long-run investment – but a Sortino Ratio of 0.1440 tells a more troubling story. For every unit of return earned above the 6% MAR, investors in the ASX 200 absorbed considerably more downside volatility.
To be fair, STW's Sortino Ratio is only poor if one insists on setting a minimum opportunity cost of 6% p.a. While 6% p.a. is a sensible and commonly used return hurdle for equity investment, arguably it's more than most investors consider to be a minimum return requirement when they invest. Also worth noting: the benchmark's 5.7% GUDY is very respectable for income-focused investors, and its average drawdown was lower than any stock in the Top 20 – there was genuine safety in diversification.
Two observations stand out from our top 20 over the last 20-years immediately. First, the low-yield cohort – stocks with a trailing 12-month GUDY below 5% – dominates. TNE (1.1% GUDY), DTL (4.3%), REA (2.4%), and PME (0.53%) occupy the top four positions. This is consistent with the finding from the last two editions of this research: on a 20-year view, lower-yielding, higher-earnings-growth companies have delivered superior risk-adjusted total returns. The best dividend stocks are growth stocks.
Second, the absolute level of Sortino Ratios in this table is modest. None of the 30 stocks cleared 1.0. This is less a reflection of market cycles than of market structure – the ASX is a yield-heavy, resources-heavy index without the concentration of high-growth compounding businesses that have driven outsized risk-adjusted returns like those seen in the US over the same period. Australian investors pay for their franking credits in the form of a market that, in aggregate, grows more slowly than its global peers.
As for the high-yield cohort – stocks with a trailing 12-month GUDY above 5% – honourable mentions go out to NHF (6.3%), FMG (8.5%), JBH (+6.2%) and NHC (5.9%) which all made the Top 10.
I could simply name TNE, DTL, REA, and PME as the best dividend stocks and leave it there — they have the best risk-adjusted returns and they pay a dividend. But that framing serves only investors focused purely on total return, and probably alienates those who prioritise income or capital stability. So, can I offer a few “Top 10’s” this year?
Top 10 Superior Risk-Return + High Dividend Yield
- Method: Sorted by "Highest Sortino Ratio" + Filtered by "Trailing 12m GUDY > 5%".
- Objective: Show the best performing ASX stocks over the last 20 years that have a trailing grossed up dividend yield of at least 5.0%.
- Suits: Investors focussed on total risk-adjusted return with a respectable dividend.
- Key performance metrics:
- Average Sortino Ratio = 0.46 (vs STW 0.14).
- Average Annualised GUDY = 6.5% p.a. (vs STW 5.7% p.a.)
- Average Average Drawdown = -14.8% (vs STW -6.0%)
Top 10 High Dividend Yield + Market-Beating Risk-Return
- Method: Sorted by Highest Trailing 12m GUDY + Filtered by Sortino Ratio > STW (i.e., ASX 200 benchmark).
- Objective: Show the best market-beating dividend stocks over the last 20-years.
- Suits: Investors focussed on high dividend income with market beating risk-adjusted return.
- Key performance metrics:
- Average Sortino Ratio = 0.40 (vs STW 0.14).
- Average Annualised GUDY = 7.2% p.a. (vs STW 5.7% p.a.)
- Average Average Drawdown = -14.6% (vs STW -6.0%).
Top 10 Capital Preservation + High Dividend Yield
- Method: Sorted by Lowest Average Drawdown + Filtered for Trailing 12m GUDY > 5% + Sortino Ratio > STW.
- Objective: Show the least volatile market-beating ASX dividend stocks over the last 20-years.
- Suits: Investors focussed on low volatility, high dividend income with market beating risk-adjusted return.
- Key performance metrics:
- Average Sortino Ratio = 0.36 (vs STW 0.14).
- Average Annualised GUDY = 6.9% p.a. (vs STW 5.7% p.a.)
- Average Average Drawdown = -10.4% (vs STW -6.0%).
Yes, there’s a great deal of overlap among those three top 10’s – but that in itself should point you towards the best ASX dividend stocks over the last 20-years. There’s also a great deal of variety that should help you construct a portfolio of dividend stocks that meet your needs.
10-year lookback: Medium-term picture
The 10-year window (2016 to 2026) spans a different market regime from the 20-year view – but arguably captures plenty of the longer period’s greatest market volatility events. Despite this, pullbacks in the ASX 200 were less severe (Max Drawdown 24.7% and Average Drawdown 5.0% versus first 10-years’ of the 20-year lookback period’s Max Drawdown 46% and Average Drawdown 12.4%) and returns were stronger (10.4% CAGR versus the first 10-years’ of the 20-year lookback period’s 6.2%).
With stronger returns and lower downside volatility, it makes sense that the benchmark’s Sortino Ratio over the 10-year lookback period improved to 0.29 from 0.14. You’ll also notice that we have four stocks (CDA, FMG, RIO, and NWH) that breached the highly desirable +1.0 Sortino Ratio. These stocks delivered greater return above the 6% MAR than below it.
Some interesting takeaways from the 10-year lookback:
- Mining stocks and mining-related stocks dominate the list: CDA, FMG, RIO, NWH, IMD, CIA, BHP, CMM, SRG, WHC, SGH, NHC and PRU. The post-Ukraine commodity cycle and the tailwind from the energy transition are visible in this data.
- The average annual GUDY of 5.4% p.a. is consistent with the 20-year lookback
- The average CAGR of 33.8% is substantially better than the 21.4% of the 20-year lookback, while average drawdown is only modestly higher (15.2% 10-years versus 14.8% 20-years) – indicating a better risk-return dynamic.
- Trailing 12-month GUDY’s are generally lower than annualised period GUDY’s, indicating either prices have risen faster than dividend yields, or dividend payouts have fallen (most likely the former)
5-year lookback: Recent form
The 5-year results (2021 to 2026) capture post-COVID inflation, the fastest rate-hiking cycle in a generation, and more recently, tariff wars followed by actual wars. The benchmark STW posted a Sortino Ratio of 0.27 over this period – down slightly on the 10-year lookback – indicating a modestly tougher environment for ASX investors.
Still, there are some very strong performances here, as evidenced by the fact that 14 of the 20 in the list breached the +1.0 Sortino Ratio. The average 12-month trailing GUDY on that cohort is a healthy 3.9% – suggesting that strong performance and regular income can go hand in hand.
Note that once again, 12-month trailing GUDY’s are in the vast majority of cases lower than annualised period GUDY’s, suggesting some research is required to understand whether the trend of lower dividend yields is set to continue. Having said this, at 3.7%, the average trailing 12-month GUDY of the 5-year cohort is better than the 10-year cohort's 3.3% but below the 20-year cohort's 4.4%.
Conclusion
Total shareholder return – the combination of dividends and capital growth – is what matters most for investors focussed on achieving the best risk-adjusted return. The research demonstrates that a focus on collecting dividends alone is almost invariably a sub-optimal approach in this regard.
The balance of income, growth, and volatility tolerance that's right for each investor is a personal decision. I hope this research gives all investors some food for thought on what constitutes good performance, and for those dyed-in-the-wool dividend junkies – a more objective framework for identifying the best dividend stocks for their portfolio.
Data sources: Norgate Data (adjusted and unadjusted price data), Market Index dividend history, the author’s own original quantitative research. Lookback periods as at 29 May, 2026.
Past performance is not a predictor of future performance. The data presented here is exclusively historic, and future returns are likely to differ from historical returns. Do your own research to determine the merits of investing in any security, or seek licensed financial advice to determine which investments are most appropriate for your circumstances.
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Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.
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Investing is risky. Inevitably you will endure losses. If you can't cope with losing, don't invest.
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Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl...
Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl...
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