High-Yield ASX Dividend Stocks: Yancoal and NRW Offer Stability Amid Volatility

Market volatility has investors scrambling for income streams that can weather economic headwinds. Among the contenders are two ASX-listed companies offering attractive yields while demonstrating sustainable payout structures: Yancoal Australia (ASX:YAL) at 9.8% and NRW Holdings (ASX:NWH) at 5.4%. Both trade at valuation discounts, but their paths to dividend sustainability differ significantly. Here's why they're strategic picks—and where to tread carefully.

Yancoal Australia (ASX:YAL): 9.8% Yield, Undervalued, but Watch the Payout Volatility

Yancoal's dividend yield of 9.87% (TTM as of June 2025) stands out in a market where many energy stocks underdeliver. This coal producer's P/E ratio of 6.14 is nearly half the sector average of 11.6, signaling undervaluation. With $2.46 billion in cash reserves and no debt, Yancoal has the liquidity to support its semi-annual dividend policy. The most recent payout of $0.52 per share (April 2025) was fully franked, boosting appeal for tax-conscious investors.

Why It's Sustainable:
- Stable Earnings: Despite a 12% revenue dip to $6.86 billion in FY2024, Yancoal maintained a 37% EBITDA margin, underpinning consistent cash flows.
- Dividend Policy: A 56% payout ratio in 2024 leaves room for reinvestment, though the 2025 ratio (listed as 0% in some reports) likely reflects a data glitch rather than a cut.

Caution Flags:
- Share Price Dips: YAL's stock fell to $5.27 by June 2025 (-19.5% from its July 2024 high of $7.46), reflecting broader coal market concerns.
- Payout Volatility: Yancoal's dividend history shows swings—from $0.325 to $0.70 per share—highlighting reliance on coal prices.

Investment Take: A long-term hold for high-yield seekers, but pair with a stop-loss given coal's cyclical nature.

NRW Holdings (ASX:NWH): 5.4% Yield, Undervalued, but Earnings Risks Linger

NRW, a diversified construction and mining services firm, offers a 5.44% dividend yield while trading at a P/E of 10.3x, below the market's 17.9x multiple. The $0.09 per share payout in October 2024 and a $0.07 dividend in April 2025 reflect a 13.5% dividend growth rate since 2020.

Growth Catalysts:
- Contract Wins: Securing the $16 billion South Walker Creek mine and Bunbury Outer Ring Road project bolsters revenue visibility.
- Cost Discipline: A 55% cash payout ratio ensures dividends are self-funded, even as FY2026 EPS is projected to grow 7.3%.

Risks to Watch:
- Earnings Declines: Analysts forecast a -5.5% average EPS drop over three years, driven by softening demand in some sectors.
- Sector Volatility: NRW's reliance on mining and infrastructure exposes it to commodity price swings and project delays.

Investment Take: A better choice than YAL for stability, but avoid if you prioritize dividend growth over income.

Valuation Discounts and Strategic Picks

Both stocks trade at compelling valuations:
- YAL's P/E of 6.14 vs. the sector's 11.6 reflects undervaluation, but its yield hinges on coal demand.
- NWH's 10.3x P/E vs. its 16.7x sector average suggests upside potential, provided earnings stabilize.

Growth Catalysts vs. Risks:
- YAL: Leverages 35–39 million tonnes of annual coal production to sustain payouts. Risks include regulatory headwinds and competition.
- NWH: Benefits from $60 million in equity raised in 2024 and new leadership (e.g., CFO Peter Bryant). Risks include earnings volatility and project execution delays.

Final Analysis: Strategic Income Picks for 2025

For income-focused investors:
1. YAL is a high-yield bet for those willing to tolerate coal market swings.
2. NWH offers balanced risk-reward, with a sustainable payout and undervalued stock.

Avoid both if you seek rapid dividend growth; their yields are stable but not soaring. Pair with diversification in lower-volatility sectors like utilities to balance portfolios.

Recommendation:
- YAL: Buy at $5.27 with a $4.50 stop-loss.
- NWH: Accumulate below $3.90, targeting $4.20 in 12 months.

In a volatile market, these two stocks offer dividend resilience—but only if you're prepared to navigate their unique risks.