Best high quality dividend paying stocks to add to your portfolio for dividend income are
Metcash Limited (ASX: MTS): A Quiet Dividend Performer with Long-Term Grit
Why Metcash Deserves a Spot on Your Dividend Watchlist
In a market where growth often steals the spotlight, Metcash Limited quietly delivers what many investors truly seek: reliable dividends backed by steady fundamentals. As Australia’s leading wholesale distributor to independent retailers in food, liquor, and hardware, Metcash supports over 2,500 stores through household names like IGA, Mitre 10, and Cellarbrations.
Its hybrid strength scale in purchasing and agility in service not only shields it from macro shocks but also enables sustainable cash generation that feeds consistent shareholder returns.
Dividend First, Volatility Last
For the financial year ended 30 April 2025, Metcash declared a final dividend of 10.8 cents per share (75% franked), bringing the total payout to 20.8 cents per share entirely in line with its historical 60% payout ratio. This marks yet another year where investors enjoyed a reliable income stream, regardless of market cycles.
Backed by net profit after tax of $259.1 million and EBIT of $496.9 million (up 1.6% from FY24), the dividend wasn’t just preserved it was reaffirmed as a strategic pillar. Even with a dip in free cash flow to $167.4 million, the company upheld its capital return promise, proving its resilience.
The Divisional Strength Behind the Yield
Metcash’s dividends are underpinned by a well-diversified revenue base. In FY25, total group revenue rose to $19.62 billion, up from $18.89 billion the previous year. Each segment contributed meaningfully:
- Food: $10.91 billion, driven by strong IGA performance in regional Australia
- Liquor: $5.26 billion, supported by rising premiumisation and expanding store reach
- Hardware: $3.45 billion, lifted by trade-focused demand and recent acquisitions
Margins remained intact despite inflationary headwinds, and disciplined cost management further protected earnings quality.
Building for Tomorrow Without Sacrificing Today
What makes Metcash stand out among dividend stocks is its ability to balance capital reinvestment with dependable distributions. FY25 marked a significant shift toward future proofing the business most notably through the construction of a new automated distribution centre in Victoria, slated for FY26. This project, along with digital investments in supplier portals and predictive tools, reflects a bold push to enhance operational efficiency.
Crucially, these moves didn’t come at the cost of shareholder returns. Despite higher capital expenditure, net debt stood at just $269.5 million, reflecting sound financial discipline. The strategy is clear: invest aggressively, but not recklessly.
Dividend Yield with Strategic Depth
Metcash’s Horizon 2 transformation strategy aims to embed automation across its supply chain, modernise retailer and supplier interfaces, and scale its hardware and liquor operations further. But unlike high-growth companies that pause dividends to fuel reinvestment, Metcash is proving it can grow and pay a rare mix.
For long-term investors seeking income, this offers a compelling proposition: exposure to defensive retail, backed by consistent cash flows, with a leadership team committed to both reinvestment and returns.
Bottom Line
Metcash may not be a flashy tech stock or a resource giant, but it’s quietly becoming one of the most dependable dividend payers on the ASX. With stable earnings, strategic expansion, and a clear focus on efficiency, the company is building long-term value while rewarding shareholders in the short term. For income-focused portfolios, Metcash offers both shelter and strength.
Pepper Money (ASX: PPM): Delivering Steady Dividends Amid Lending Headwinds
Backing Underserved Borrowers, Rewarding Patient Investors
In a financial sector often dominated by the big banks, Pepper Money Limited (ASX: PPM) has carved out a resilient niche. As a leading non-bank lender across Australia and New Zealand, the company serves customers that traditional institutions frequently overlook self-employed individuals, near-prime borrowers, and small business owners.
By combining tailored lending products with strong credit risk management and digital servicing platforms, Pepper is positioning itself as a flexible, customer-centric lender. That same adaptability is helping it maintain a stable dividend stream even as broader lending conditions tighten.
A Reliable Income Stream in Tougher Conditions
Despite margin pressures, inflation, and increased funding costs, Pepper, one of the highest paying dividend stocks, stayed committed to its shareholders in FY24. The company declared a fully franked final dividend of 7.1 cents per share, bringing the total FY24 dividend to 12.5 cents per share. This represents a payout ratio of 52.7%, balancing investor returns with internal capital needs.
The dividend was paid on 20 March 2025 to shareholders on record as of 6 March 2025, reinforcing Pepper’s consistency in shareholder distributions. In a year where several financial players reduced or deferred payouts, Pepper stood firm a sign of confidence in its long-term fundamentals.
Financial Base Still Intact
Pepper reported a net profit after tax of $98.8 million for FY24, down from $111.2 million in FY23. Net interest income dipped to $379.3 million, mainly due to funding cost inflation and competitive loan pricing. Operating expenses rose to $259.2 million, reflecting both macro cost pressures and strategic tech investments.
Yet, the company maintained a strong capital base. With total equity at $762.2 million and over $3.4 billion in undrawn funding available, Pepper retained the financial flexibility needed to sustain its dividend policy even in an environment of economic uncertainty.
Dividend Yield Snapshot
Based on the share price around the result date, the 12.5-cent dividend equates to a fully franked forward yield of approximately 6.7%. These positions Pepper as one of the higher-yielding midcaps on the ASX within the financial sector. For income-focused investors, particularly those looking beyond the big four banks, Pepper offers a compelling value proposition.
Supporting this yield is operating cash flow of $101.1 million, and a healthy dividend coverage ratio. Management has shown discipline in balancing reinvestment for growth with capital returns, and the current payout reflects that mindset.
What Dividend Watchers Should Expect in FY25
Looking ahead, Pepper faces challenges around tightened lending margins, volatile funding costs, and slower origination growth. However, its diversified loan book, risk-adjusted pricing models, and focus on underserved market segments give it room to manoeuvre. Its strategy to digitise servicing and streamline operations could support margin recovery in the medium term.
Future dividend levels will depend on the company’s ability to protect net interest margins, grow originations, and keep arrears low. If macro conditions stabilise and loan volumes improve, Pepper may retain or even enhance its dividend levels, but investors should view it as a yield stock with moderate growth risk.
Bottom Line: For income-seeking investors looking for alternatives to the major banks, Pepper Money offers a steady hand. Its FY24 payout reinforces the view that PPM is committed to maintaining dividend discipline, even as it navigates a more complex lending landscape.
(Source: Company Announcements)
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