10 Best Australian Stocks to Watch in 2024

Australian stocks benefit from the foundation that Australia’s strong and resilient economy provides. Fuelled by a growing population, low cost natural resources, and proximity to some of the world’s most dynamic markets in Asia, Australia’s economy has consistently grown faster than other advanced economies in the past five years. Continuing this trend, it’s forecast to outpace its peers in the next five years through 2029.

On top of this, its sound financial and legal system draws investment from around the world, giving impetus to cutting-edge industries, such as renewable energy, critical minerals and skill-based technologies.

These economic advantages are reflected in its stock market, which is dominated by the financials and materials sectors. The three largest companies by market cap on the Australian Stock Exchange (ASX) — the Commonwealth Bank of Australia, miner BHP Group, and biotech company CSL Limited — are valued at close to AUD $600 billion (US $403 billion).

While the S&P 500 has recently outperformed the S&P/ASX 200, Australia’s benchmark stock index, there are plenty of reasons for including Australian stocks in your portfolio, such as adding diversification, and the above-average dividends that some of the Australian stocks provide due to the nation’s supportive tax regime. We have reviewed the Australian stock market and selected 10 stocks that we think have the most upside. See our picks below:

An in-depth look at these top ASX stocks

We’re focusing on the Australian stocks that are delivering strong returns. All of these companies have strong track records of growth, with several of them showing double-digit revenue and share gains over the past five years.

1. CSL Ltd.: Average 10-year annualised return of 15.44% 

CSL began as an arm of the Australian government but now is a private company. It earns half of its revenue in North American and a quarter of its revenue in Europe. Over the past decade its revenue has risen at a compound annual growth rate (CAGR) of 10% and net profit climb with an 8% CAGR.

CSL Ltd. spends heavily on research and development and most of its revenue comes from its market-leading position in plasma-derived proteins or recombinants to treat medical conditions. It also has a strong niche in influenza vaccines. CSL has nine therapies in Phase 3 trials. The biothech firm has manufacturing plants in Bern and St. Gallen in Switzerland, Broadmeadows and Parkville, Australia, Holly Springs, N.C., and Kankakee, Ill., in the US, Marburg, Germany, Liverpool, England, and Wuhan in China.

In the first half of fiscal 2024, its revenue rose 11% to AUD $8.05 billion. Net profit after taxes (NPAT) increased 20% to AUD $1.96 billion. 

The firm is known for paying a consistent dividend and it has raised its annual payout every year since 2009. It raised its interim dividend by 11.2% this year to US $1.07, so it’s on its way to another annual increase. The yield on the dividend is 1.25% and the payout ratio is around 46%, meaning the dividend growth will likely continue.

2. Pinnacle Investment Management Group: Average 10-year annualised return of 36.35% 

Pinnacle holds equity interest in and provides seed funding for 16 affiliate management groups. They are in global institutional and retail distribution, and industrial grade middle office and infrastructure services. It’s seeing its investments in diversification, distribution and infrastructure pay off. In 2016, 67% of the equities it had shares in were Australian and now that figure is down to 38%.  

Pinnacle reported fiscal 2024 NPAT of AUD $90.4 million, up 18% and earnings per share (EPS) of AUD $0.455, up 17%. It also grew its full-year dividend by 17% to AUD $0.42. The dividend is franked to 82%, down from 100% in 2023 and has a yield of 2.49%.

Its affiliates also saw strong growth, with assets under management (AUM) rising by 20% to AUD $110.1 billion, and 85% of affiliate strategies outperforming their benchmarks over the past five years. Founder Ian Macoun said he sees Pinnacle eventually doubling its AUM. The company itself has shown steady long-term growth, with NPAT rising with a CAGR of 24.3% since 2016 and EPS increasing by a CAGR of 21.7% over that same period. Over the past 10 years, it has increased assets under management by a CAGR of 24.5%.

3. StepOne Clothing: Average 2-year annualised return of 119.5% 

StepOne is off to a strong start financially. In the first half, it saw revenue rise by 25.5% year over year to AUD $45.1 million, with its customer base increasing by 40% from the same period a year ago. NPAT climbed to AUD $7.1 million, up 34.7% year over year. The company recently said it expects full-year revenue to be AUD $84 million, up 29.2% over 2023. Its forecast for earnings before interest, taxes, depreciation and amortisation (EBITDA) is AUD $17 million, up 42%.

The exciting thing about the stock is that it’s still early in its growth cycle, and it’s developing a loyal customer base beyond Australia. While revenue growth in-country was only 8.9% to AUD $26.2 million, its UK sales rose 38% through six months to $14.7 million. US revenue growth was even better, soaring 256% to AUD $4.1 million, with Amazon sales playing a big part in that growth. 

The company is well-positioned to grow with AUD $43.9 million in cash and no debt. It also has an excellent dividend that is fully franked and pays a yield of 5.39%.

4. Helia Group: Average 10-year annualised return of 12.58% 

Helia, formerly known as Genworth, is a crucial part to Australia’s property market as its first Lenders Mortgage Insurance (LMI) provider. The company also offers an above-average dividend that has a yield of around 7.69%. The dividend is well-covered with a payout ratio of around 34%. What’s more, it has attractive valuation. Helia’s shares are trading at less than five times earnings after they have fallen more than 13% this year. It dominates the LMI market, giving it a big edge over competitors. There are concerns, though, now that it’s negotiating with its biggest client, Commonwealth Bank.

Rising home prices have slowed the company’s business. With interest rate cuts likely on the horizon, though, it may soon be easier for homeowners to buy a home. Still, man will need Helia’s help to afford a large down payment.

In 2023, its grew net profit to AUD $275.1 million, up 36.7%. Earnings per share (EPS) climbed 61.7% to AUD $84.7 million. However, its 2023 gross written premium was AUD $185.2 million. It fell due to the depressed market conditions for new lending, particularly in high-loan-to-value-ratio lending. Meanwhile, revenue also fell 8.6% to $427.3 million.

Helia has been active in stock buybacks, reducing its number of shares. This year, Helia is forecasting it will buy 60 million more shares.

5. Inghams: Group: Average 7-year annualised return of 4.99% 

Inghams sells chicken and turkey products in Australia and New Zealand and also makes stock feed for poultry and pig farmers. It  continues to grow through acquisitions. To this end, it’s in the process of buying New Zealand’s only organic chicken farm, Bostock Brothers, for AUD $33 million. While the stock has slumped due to Avian flu concerns, the disease hasn’t been found yet on any of the company’s facilities. 

Inghams’ revenue rose 8.7% to AUD $1.64 billion in the fiscal first half of 2024, while its EBITDA was AUD $253.7 million, a rise of 28.8% year on year. Meanwhile, NPAT was AUD $62.3 million, an increase of 286.6% year over year. Investors, however, drove the price down because of Inghams’ below-average yearly forecasts.

Inghams began paying a dividend in 2018 and it now yields 6.1% and it’s fully franked. It increased its interim dividend to AUD $0.12, up 166.7% year over year. While inflation has had an effect on sales, the company has been able to increase prices because of the rising cost of beef. It has also invested in automation, which it expects will help its margins going forward.

6. Wesfarmers: Average 10-year annualised return of 14.41% 

The conglomerate’s shares are up more than 23% this year and hit an all-time high of AUD $74.04  on Aug. 1. The company owns some of the country’s largest retailers, including supermarket operator Coles, home improvement chain Bunnings, Officeworks, K-mart, and Target. It diversified beyond retail, including pharmaceuticals, data assets, chemical and fertiliser production, gas processing and distribution and lithium mining.

Despite pressure from Amazon on its retail sales, Wesfarmers is off to a strong year. In its half-year report, it had AUD $22.7 billion in revenue, up 0.5% year over year, and NPAT of AUD $1.43 billion, up 3% over the same period last year. Operating cash flow per share was AUD $2.56 compared to AUD $1.74 in the first half of 2023.

Wesfarmers is also known for a consistent dividend. It raised its interim dividend by 3% this year to AUD $0.91 and it’s on track for its fourth consecutive year of dividend growth. Its dividend yield is around 2.73%.

Ironically, the one cloud on Wesfarmers’ horizon is a result of its own success. The Australian Senate is looking at a bill that would allow regulators to require large retail companies to divest certain assets. The goal is to lower the market power of major corporations such as Wesfarmers.

7. Woolworths Group: Average 10-year annualised return of 5.18% 

The company operates the Woolworths grocery chain, as well as the Big W department store, and also has a finance business. Like Wesfarmers, Woolworths is also taking heat because of its strong profits. Some of the biggest growth for Woolworths has been in its house brands in pantry, frozen foods and household care.

In the third quarter, its sales were AUD $16.8 million, up 2.8% year over year. E-commerce sales climbed 17.6% to AUD $1.93 million. EPS rose 17% to AUD $0.455. That result continues the trend of the first half. Group NPAT of AUD $929 million, up 2.5% from the first half of 2023 and group sales up 4.4% to AUD $34.6 billion. First-half EPS was AUD $0.762, up 2%.

Woolworths’ yearly dividend has increased 766% over the past 20 years and the current yield is around 2.74%. It raised its interim dividend by 2.2% this year to AUD $0.47.

The company is getting more heavily into finance. In April, it began a partnership with four other large global retailers — Tesco, Ahold Delhaize, Empire and Shoprite — to set up the W23 Global fund. It will target startups in sectors including supply chain, sustainable packaging and agricultural biodiversity.

8. Aristocrat Leisure Ltd.: Average 10-year annualised return of 26.36% 

Aristocrat’s products and services include electronic gaming machines, casino management systems, free-to-play mobile games and online real money games, including iLottery. Its stock has risen more than 24% so far this year.

In the first half of fiscal 2024, Aristocrat’s revenue rose 6.1% year over year to AUD $3.3 billion. The increase was led by a 8.3% rise in its land-based gaming business to AUD $1.68 billion, and a 52% climb in revenue from its Aristocrat Interactive segment to AUD $71.9 million. EPS rose 19% compared to the same period, to AUD $1.12. NPATA increased by 16% year over year to AUD $764 million. The company has recently released its all-new House of the Dragon slot game, based on the HBO Original series, similar to its Game of Thrones slot game.

Aristocrat raised its interim dividend by 20% to AUD $0.36, giving it a yield of around 1.35%. It has raised its annual dividend payout by 45.7% since 2016. It completed its AUD $1.2 billion purchase of NeoGames this year in an effort to concentrate more on profitable online real money games.

9. WAM Global Ltd.: Average 6-year annualised return of 3.8% 

WAM Global is part of the Wilson Asset Management Group. It looks to invest in undervalued international growth companies, many of them US companies that are not necessarily well known. Some of its top performing holdings this year include: Edwards (NYSE: EW), Gallagher (NYSE: AJG), HCA Healthcare (NYSE: HCA), Quanta (NYSE: PWR), and Tradeweb (NASDAQ: TW). It has an above-average dividend yield of 6.2% and its shares are up more than 9% this year.

In July 2024, the company had net tangible assets per share before tax of AUD $2.50, up 7.8% from a year earlier. That continues its trend of growth. For the first half of its fiscal year ended 31 December, it posted revenue of AUD $45.72 million, up 127% year over year, and EPS of AUD $0.08, up 156% from a year earlier. It also had total shareholder returns of 10.9%, including an AUD $0.06 fully franked interim dividend. So far this year, the stock is up more than 7%.

The investment company has more than tripled its yearly dividend payout over the past five years, thanks to its consistent growth. This year, it will pay AUD $0.12 per share in dividends, up 4.3% over last year.

10. AIC Mines: Average 5-year annualised return of -5.51% 

AIC benefits from the transition away from fossil fuels as copper is one of the key minerals needed for that transition. The company recently released strong production numbers for 2024 that delivered on earlier estimates. It exceeded its goal of 12,500 tonnes of copper and 5,000 ounces of gold in concentrate from its Eloise mine by 900 tonnes. It reported 13,412 tonnes of copper and 6,669 ounces of gold in concentrate. The copper sold for AUD $5.15 per pound and the gold concentrate fetched AUD $5.39 per pound.

In the interim report, it had revenue of AUD $91 million, up 58.2% year over year. Net income totalled AUD $2.23 million, after losing AUD $5.2 million in the same period a year ago. A big factor going for it is that the miner has no debt. In addition, as of 31 March, had AUD $27.5 million in cash, enabling it to develop its Jericho mine, which is located four kilometres south of its Eloise mine and processing plant.

The Queensland Government’s Department of Resources granted AIC a 10-year mining lease for Jericho in May, allowing AIC to begin surface operations. The addition of the Jericho mine should allow the company to grow its production to 20,000 tonnes of copper and 10,000 ounces of gold a year, it said.

Year-to-date performance of these top Australian stocks 

Ticker on ASX	Company	Performance YTD
CSL	CSL Ltd.	+7.63
PNI	Pinnacle Investment Management Group	+67.46
STP	StepOne Clothing	+61.19
HLI	Helia Group Ltd.	-12.64
ING	Inghams Group	-7.32
WES	Wesfarmers	+24.47
WOW	Woolworths Group	+10.45
ALL	Aristocrat Leisure Ltd.	+27.12
WGB	WAM Global	+8.77
A1M	AIC Mines Ltd.	-11.59

Pros and cons of investing in Australian stocks 

Investing in Australian stocks can help improve diversification and can be a way to find value and growth in your portfolio. However, it’s important to weight the pros and cons of investing in stocks down under.

Pros

• Dividend Yields: Australian companies often offer attractive dividend yields, providing steady income for investors.
• Population growth: Australia’s population is growing at a higher rate than the UK or the US, thanks in part to immigration. There’s a new Australian citizen every 50 seconds, which bodes well for most Australian companies.
• Government Support: The Australian government has historically supported business growth and investment.

Cons

• Market Size: Compared to major global markets like the US, the Australian market is smaller, which can limit diversification opportunities.
• Economic Dependence: Australia’s economy is heavily reliant on commodity prices, which can be volatile.
• Geographic Concentration: The Australian market is concentrated in a few sectors, primarily financials, mining, and energy.

Do I need to pay tax on stocks in Australia?

Understanding taxes is often best left to professionals. However, there are two different types of taxes that apply to stocks in Australia. First, is Capital Gains Tax (CGT), which applies when you sell a stock for more than you bought it for. You only pay CGT on half of your profit if you have owned the shares for more than 12 months. The actual rate of the CGT depends on your income tax bracket.

Dividends from Australian companies are considered taxable, though Australian companies often attach franking credits to their taxes to reduce the amount of taxes that investors pay.

Methodology: Choosing the 10 best ASX stocks

Looking for the top 10 best ASX stocks, we focused on a diverse list that went beyond the typical basket of Australian mining stocks. In that basket, we looked for companies that, as of their last reporting period, are growing revenue and profits and have a strong track record of growth over the past five years.

Some of the factors we examined:

Dominant market position: Is this company a leader in its market? Does it have an edge over its competitors, either from a standpoint of size or of expertise? CSL, Inghams and Wesfarmers are all examples of companies with strong market positions.

Stock Performance. One of the key factors we look at is the performance of the stock. Specifically, we want to know if the stock has a history of outperformance, consistently beating its benchmarks over the long term. StepOne Clothing, Wesfarmers and Aristocrat Leisure are good examples of companies that have outshone competitors in stock performance.

Earnings growth. We examine how consistent the company has been in generating year-over-year earnings growth. Ideally, we are looking for stocks that generate double-digit annual earnings growth on an annual basis over a multi-year period.

Reasonable Valuations. Most importantly, we want to ensure that the P/E, price-to-sales, and other valuation measures are not unusually high based historical ranges. Trading at less than five times earnings, Helia Group one of the stocks with a low valuation on the list.

Growth Catalyst. In addition to any competitive advantages, it’s important to look for other growth catalysts that could spur the stock higher. Did it expand into new markets through an acquisition? Are there new or pending regulations that could help or hinder the company? Are there new products coming, are there changes in the industry? These are just some examples.

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