10 Underrated Dividend Stocks on the ASX | Aussie Investors Blog (2023)

While most Aussies looking for dividend stocks to invest in typically conjure up images of the big banks, iron ore majors, or even REITs, there’s an entire other world out there of dividend-paying companies that often goes ignored.

We take a look at 10 underrated dividend stocks on the ASX here.

NOTE: we do not currently hold any of these companies in our portfolio.

Go sifting through the mid and small-cap space on the ASX, and you’ll find a range of under-the-radar and seldom-discussed companies that not only pay consistent chunky dividends, but also throw in an impressive helping of growth on top.

As an added bonus, many of these smaller companies have high levels of insider ownership from the company founder and/or board as well.

This incentivises them to keep dividend payout ratios high, and we can also then jump on board & reap some benefit ourselves… kind of like those Remora fish that attach themselves to a shark and leech the sweet, sweet leftovers.

Here are some of the best that have consistently high dividend payouts, and overall strong fundamentals.

1. Ive Group Ltd (IGL)

What they do: printing services, design, marketing communications

Most recent dividend yield: ~8.5%

Franking %: 100%

Our status: not held

Everyone’s favourite letterbox spammers they’ve never actually heard of, IGL only listed on the ASX back in 2015, but have been around as a company for a very long time.

The Sydney-based company have existed in some form since 1921, and any time you receive some kind of flyer, magazine, brochure or similar in the mail there’s a high likelihood it came courtesy of these guys.

While there might be a bit of a public perception about print media being a “dying industry”, IGL deal just as much with corporate marketing materials, packaging, signage and other always-required physical printed items that companies continue to need for branding purposes.

In addition, the company has diversified its offerings over the years to provide more digitally-oriented services such as data analytics, CRM systems and more.

Since listing, IGL have shown solid revenue growth/stability pretty much every year, as well as slightly increasing margins and being almost-always profitable.

Since the Covid March 2020 stock market tumble, the company has remained quite undervalued based on its fundamentals, and still looks pretty “cheap” share price-wise given its revenue figures have recovered.

All this while paying a pretty hefty dividend, too.

2. Microequities Asset Management (MAM)

What they do: listed investment manager focused on small/micro-caps

Most recent dividend yield: ~7.8%

Franking %: 100%

Our status: not held

While you’ve probably heard of some of the bigger market cap fund managers on the ASX that get all the media coverage and feature well-known talking heads, these guys operate on the other end of the ASX company-size spectrum.

MAM focus on providing investment management services oriented around the small and micro-cap space of Aussie stocks, with a focus on industrials.

The microcap space can feature some innovative little companies that can see quick and substantial growth if things break right.

These guys scour the space for “deep value” profitable picks (kind of like what I enjoy doing myself, actually) that have some form of competitive moat or advantage, good management and profitable business models, and build their funds based around a portfolio of these.

As a result, for retail investors buying into the actualstock of MAM itself are almost by proxy buying a “profitable small-cap ETF” in a sense, as the company’s listed share price correlates to the performance of the companies they hold within.

Given that they handle all the legwork of meeting face-to-face with management of these smaller companies & assessing their credibility, performing detailed analysis on each business, have delivered strong returnsand pay out a dividend with such a high yield…

…it’s a potential great way to get curated, managed exposure to what can otherwise be a pretty wild-and-woolly part of the ASX.

3. CPT Global (CGO)

What they do: IT services, focused on the banking sector

Most recent dividend yield: ~7.3%

Franking %: 100%

Our status: not held

As we mentioned, high levels of insider ownership is one of the key signals we like to look at when considering investing in the small and micro-cap space – and if you can combine that with a solid growth story and profitability, even better.

Melbourne-based IT consulting & services provider CGOticks both of these boxes, along with one of the best dividend payouts for a firm in this space. Throw in increasing profit margins, and that’s just the icing on the proverbial cake.

The core part of the company’s business is consulting and devops for larger, security-conscious clients such as government departments, banks & those in the finance space.

Again, this is a contract-based business which can lead to unpredictable revenue, with only a limited number of such contracts available at any one time within Australia.

To help alleviate this, the company has turned its focus to securing more contracts in the US and Europe, with clients in over 35 countries globally.

With the continued digitisation and evolving tech requirements for businesses that’s been accelerated by Covid-19, the need for specalist services such as that CGO offer looks only set to grow.

Market cap-wise, this is a tiny company for a listed one, and still with heavy legacy family involvement; if they can prove their recent turnaround was not a fluke, then this starts to look even more undervalued.

4. Shaver Shop Group (SSG)

What they do: sell shavers… in a shop (and online)

Most recent dividend yield: ~6.9%

Franking %: 100%

Our status: not held

Ever randomly wanted to short the hairdressing industry? Investing in these guys might be a round-about way to do it.

If you’ve ambled through a major Aussie shopping centre at any point in the last couple of years, you’ve probably seen one of SSG‘s stores with their bright orange signs acting as a gateway into a wide world of hair-removal goodness.

Clippers, shavers, groomers, electric toothbrushes, styling tools – their products aren’t particularly sexy, however they’re undeniably essential, and have become even moreso since the onset of the Covid-19 pandemic made getting to your local barber or hairdresser both a difficult (and risky) business.

Even before the pandemic hit, Shaver Shop has been highly profitable ever since listing; the last couple of years have simply magnified this further.

In addition, despite losing thousands of physical-store trading days due to virus-related closures since March 2020, the company has pivoted well to the online space.

They’ve managed to rack up massive year-on-year increases in digital sales that have allowed them to keep up revenue momentum.

The retailer now operates over 120 stores across Australia & New Zealand, and pays one of the best dividend yields of any retailer – regardless of market cap size – on the ASX.

5. Southern Cross Electrical Engineering (SXE)

What they do: electrical services contractor for commercial & resources sectors

Most recent dividend yield: ~6.9%

Franking %: 100%

Our status: not held

Western Australian electrical services contractor SXE are another small cap that continues to hit growth milestones, make subtle and intelligent acquisitions, and keep a pristine balance sheet – all while winning new contract after new contract.

While like any tender-and-contract based business their revenues can be choppy, the company now is in a position with a long runway of guaranteed locked-in projects. This has lead to a record order-book and increasingly high dividend yield as a result.

Most of their business is divided between major infrastructure projects, and construction & support projects to the mining/resources industry, with the decline in the former being more than offset by a rise to prominence in the latter.

The company’s electrical bent also positions it nicely with the upcoming battery revolution and electrification-of-everything that’s set to take place in the coming years, with such projects already secured with the likes of Rio Tinto.

They’ve also got a ton of free cash on their books (and zero debt) relative to their current market cap, which combined with the level of dividend they’ve started paying to make for an intriguing growth story. It’s also one that some proposed additional acquisitions may help accelerate.

Even their ticker code looks, quite literally, sexy.

6. Capral Ltd (CAA)

What they do: producer of aluminium fabrications for residential & commercial buildings

Most recent dividend yield: ~6.8%

Franking %: 100%

Our status: not held

One of our own largest holdings, aluminium fabricator CAA has emerged from several years worth of doldrums with an optimised business structure and some expanded production capacity to become one of the more lean and undervalued small caps on the ASX.

This also happened to coincide with the massive boom of the Australian housing market, which accelerated even further over recent years, to create something of a perfect storm of conditions for maximising demand for CAA’s products.

International supply issues for those businesses who might otherwise source the same items – mainly aluminium extrusion products – from overseas only exacerbated things further.

This led to CAA now experiencing a massive backlog of work that even their recent acquisitions of additional plant capacity has barely been able to keep up with.

The company has since issued multiple earnings forecast upgrades, with a strong balance sheet and plenty of cash on the books which they’ve used some of to pay out a solid dividend.

CAA have also mentioned looking at more potential acquisitions of some local competitors which would only expand their revenue figures further – assuming they choose the right targets.

7. Shriro Holdings (SHM)

What they do: watches, kitchens and BBQs, oh my…

Most recent dividend yield: ~6.2%

Franking %: 100%

Our status: not held

One of the more unusual companies on the ASX in that they deal with the distribution and marketing for a pretty mixed array of products, SHM are another profitable smallcap you’ve probably never heard of.

They serve as the Aussie distributor for the Casio brand of watches & musical instruments for one, while also covering a product lineup that features kitchen appliances and barbecues.

As you’d expect, pretty much all of these hit the demand sweet-spot induced by Covid-19, as people confined to their homes took up or rehashed old musical hobbies, and spent an increasing amount of money on home improvements and catering vs. dining out.

This resulted in record levels of earnings, leading to the board deciding to pay out another solid dividend along the lines of what they’ve paid as peak-level payouts in past years.

While they’re Aussie-based, the international market continues to play a significant role in revenue generation, with SHM now having a distribution network that covers 33 countries. Their barbecues have done particularly well in Europe, where the Everdure brand continues to gain strength.

Online sales also continued to play a more prominent part in their consistent recent sales growth, with only one major red flag along the way.

The company experienced a major cyber attack during mid-2021 which temporarily caused a blip in its operations and resulted in some loss of revenue for the financial year. They’ve since upgraded cybersecurity to avoid similar incidents moving forward.

If they can continue their overseas growth – revenue from these markets grew by 139% in 2021 – they’re well positioned to continue to pay high dividends for the forseeable future.

8. Ambertech (AMO)

What they do: distributor & installer of audio-visual equipment

Most recent dividend yield: ~9.4%

Franking %: 100%

Our status: not held

A Sydney-based micro-cap who deal with the distribution and installation of a range of audio-visual equipment such as home cinemas, antennas, projection units and various other cables and parts, AMO are another company which has benefitted from the home-hobbyists boom brought on by the pandemic.

The company provides equipment which has been involved in projects running across a pretty diverse range of clients, from schools, to public council spaces, to luxurious private estates and more.

They’ve also used money generated in the past couple of years to partake in a couple of crucial acquisitions, notably its purchase of Hills’ AV division in 2019 which has since been fully integrated as part of the business and added additional distribution.

The broad base of sectors who require their solutions means they’re not particularly dependent on the boom or bust of any one kind of product or installation. Defence, home entertainment, media and commercial installations all contribute to overall revenue.

AMO’s debt level continues to reduce year on year, and they now have the largest amount of cashflow on hand in the company’s recent history.

While JobKeeper played a role in inflating some of their past profit figures, the company looks set to remain profitable for the foreseeable future based on forecasts released to the market, and comparible revenue and profit figures should mean a comparatable dividend is maintained alongside them.

9. Motorcycle Holdings (MTO)

What they do: motorbike dealerships & accessories distributor

Most recent dividend yield: ~6.2%

Franking %: 100%

Our status: not held

While cars might typically get all the love and attention during the recent price boom in vehicles, don’t sleep on those that come with two fewer wheels, either.

QLD-based MTOis the leading motorbike dealership & accessories group in Australia with over 40 retail locations spread throughout the country, selling all of the ten most popular motorbike brands across its range of stores.

As Aussies have been mostly confined to domestic travel over the past couple of years, sales of almost all ground-based vehicle types have seen a big uplift, and motorbikes have been no exception.

This has allowed a company that was already seeing consistent revenue growth every single year since listing on the ASX in 2016, to receive an additional shot in the arm.

The company then used this extra cash to embark on a couple of more acquisitions – including an accessory distribution business in New Zealand, and another Queensland motorcycle dealer – which look set to add substantial additional revenue figures to its bottom line while expanding its geographical footprint.

In addition, increasing profit margins mean that these should only serve to improve its balance sheet moving forward, and continue to pay its substantial dividend.

And all this while reducing overall debt? There’s a lot to like here.

10. Lowell Resources Fund (LRT)

What they do: investment fund oriented around junior mining companies

Most recent dividend yield: ~8.4%

Franking %: 100%

Our status: not held

A fund dedicated to a grab-bag of speccy miners, all in one? Don’t mind if I do!

The ASX-listed Lowell Resources Fund (LRT) associated with Cremorne Capital is one likely to be after speculative investors hearts.

Run by a team of experts with strong experience in selecting companies in the exploration stage prior to production, the company performs extensive research on companies embarking in this high-risk, high-reward space alongside resource industry insiders who provide a dose of expert knowledge.

This isn’t only limited to standard precious metals such as gold and silver (although gold miners form the highest concentration of the fund’s holdings commodity-wise), either; the fund also dabbles in the oil and gas space, as well as practical metals such as nickel and copper.

Retail interest in the fund continues to grow, and over the 2020-2021 period, the fund’s net assets grew nearly 37% to just under $45 million, and outperformed its benchmark (the ASX Small Resources Index) by 13.7%.

Its continued solid level of performance resulted in a chunky dividend being paid for 2021, making for a pretty damn impressive 1-year combo of large dividend payoutand nearly a 50% growth in its listed share price.

Will definitely be an interesting one to keep an eye on to see if they can replicate this level of performance over another year, or whether it’s an aberration.

At worst, entrusting your money in the speculative mining space to people who actually know what they’re doing remains an intriguing prospect.

Have any other underrated ASX dividend stocks you’d recommend? Let us know in the comments below.