ASX's Best Kept Secret: Where to Find High-Yielding Cheap Shares in Australia

If you’ve been hunting for cheap shares with high dividends in Australia, the Australian Securities Exchange (ASX) might be your goldmine. As of April 2023, the market was projecting an average dividend yield of 4%, but savvy investors know there’s much more hiding beneath the surface.

Why These Dividend Plays Actually Make Sense

Let’s cut to the chase—why are income-focused investors obsessing over dividend stocks? The numbers tell the story.

Companies Paying Dividends Are Usually Winners

Here’s a simple truth: when a company consistently pays dividends, it’s basically telling you “we’re stable, profitable, and generating real cash.” That’s not hype—that’s financial muscle. The data backs this up. Between 1927 and 2014, dividend-paying stocks in the S&P 500 delivered an average annual return of 10.4%, while their non-dividend-paying peers only managed 8.5%. Even better? These income stocks showed lower volatility with just an 18% standard deviation.

Think about what that means: you’re getting higher returns and sleeping better at night knowing the risk is lower.

The Power of Reinvestment (And Free Money)

Most Australian dividend stocks offer a Dividend Reinvestment Plan (DRP), which is basically a hack for compounding wealth. Instead of pocketing cash dividends, you buy more shares. The best part? No transaction fees. That’s how fortunes get built over time without lifting a finger.

Your Shield During Market Chaos

Remember the last time the market crashed? Dividend stocks held up better than growth plays. Why? Because they’re from established, rock-solid companies with a history of steady earnings. Growth stocks tank when optimism evaporates, but dividend payers? They’re built differently. They provide that defensive layer when things get volatile.

The Real MVP Stocks on ASX Right Now

Here’s where it gets interesting. We’ve got a solid list of cheap shares with high dividends across Australia that are worth eyeballing:

Data as of April 27, 2023. Market conditions evolve constantly.

The Standouts Worth Your Attention

Terracom Ltd – The Yield Monster

With a dividend yield sitting at 42.64%, Terracom isn’t your typical ASX play. This is for investors with serious income appetites, though fair warning—high yields like these come with extra volatility. The silver lining? A 1-year return of +10.26% shows the company’s operational strength. No DRP available, but if you’re chasing cash flow, this is hard to ignore.

Yancoal Australia – Coal with Conviction

The coal mining sector is cyclical, but Yancoal shows why investors keep coming back. With a 22.34% dividend yield and a solid 1-year return of +9.11%, the company demonstrates real resilience. Coal prices have been all over the map, yet Yancoal keeps shareholders happy. That’s the kind of operational discipline that builds wealth.

New Hope Corporation – The Diversified Operator

Don’t pigeonhole this one. New Hope isn’t just a coal play—they’ve got fingers in mining, exploration, ports, oil, agriculture, and tech. The 16.10% yield is respectable, but the star metric is that 105.53% one-year return. That’s what happens when a diversified operator hits its stride. With a 23.63% gross yield, shareholders are getting the full benefit.

Regal Investment Fund – The Global Play

If you want ASX exposure to global markets, Regal offers a 15.86% dividend yield while spreading your bets across Australian and international shares. The DRP option means you can compound your wealth automatically. It’s the lazy person’s way to diversification.

Zimplats Holdings – Platinum Exposure Made Easy

Mining platinum in Zimbabwe sounds exotic, but Zimplats brings real commodity upside. An 11.07% dividend yield pairs nicely with an 18.21% one-year return. As demand for platinum industrial applications rises, this could be your play on a specific commodity without the headache of direct mining operations.

How Smart Investors Pick Their Dividend Winners

If you’re serious about finding cheap shares paying solid dividends in Australia, here’s your checklist:

Yield Reality Check: Calculate it yourself—annual dividend divided by share price. Higher yield = better return, but always ask why the yield is so high. Sometimes it signals opportunity, sometimes it signals trouble.

Payout Ratio Matters: If a company’s paying out 90%+ of earnings as dividends, where’s the money for growth? A lower payout ratio (60-70%) suggests the company is reinvesting profits and has room to increase dividends down the line.

Dividend Growth Trajectory: The best investors hunt for companies consistently raising dividends year after year. It’s a signal of confidence and real profit growth, not just financial engineering.

Balance Sheet Inspection: Revenue growth and profitability are table stakes. Check debt levels too. A company buried in debt can’t sustain high dividends through downturns.

Industry Winds Matter: Regulatory changes, technological disruption, commodity cycles—these aren’t background noise. They determine whether a dividend survives or disappears. Coal stocks paying 20%+ yields? That’s influenced by commodity cycles. Factor that in.

The Bottom Line

The ASX is loaded with cheap shares offering genuine dividend income for Australian investors, from mining operations to financial services. Yes, high-yield plays carry more risk than the ASX average. But for investors prioritizing cash flow over speculation, the opportunity set is real.

Before you dive in though, do the work. Research the company’s fundamentals, understand the industry headwinds, and build a thesis around why you’re buying. A 20% yield looks great on the spreadsheet until the company cuts the dividend by half. That’s when due diligence becomes your best friend—and it might just save your portfolio from a painful mistake.