With interest rates falling to record lows, investors have been scrambling to find quality dividend shares to fill the income void. In this article, I’ll look at two you may not have considered.
Ausnet Services Ltd (ASX: AST)
AusNet Services is an Australian energy company, listed on both the ASX and the Singapore Stock Exchange. AusNet Services is currently 31.1% owned by Singapore Power, 19.9% owned by State Grid Corporation of China, and the remaining 49% is publicly owned.
AusNet’s network includes over 6,700km of power lines, 11,400km of gas mains, 13,000 electricity transmission towers and around 383,000 power poles.
The company also operates one of five electricity distribution networks and one of three gas distribution networks in Victoria. The company earns highly regulated profits with energy price movements set by the Australian Energy Regulator (ERA).
AusNet’s Victorian assets are worth $9 billion and generate approximately 85% of its revenue, which is extremely stable and reliable due to the highly regulated environment in which the company operates.
AusNet consistently produces strong cash flows, which supports its impressive 5.4% dividend. This makes it a potentially good alternative to other dividend favourites such as Commonwealth Bank of Australia (ASX: CBA) and BHP Group (ASX: BHP).
Iress Ltd (ASX: IRE)
Iress is a technology company that provides software to the financial services industry. Through its global team of 1,950 people, Iress provides software and services for trading and market data, financial advice, investment management, mortgages, superannuation, life and pensions, and data intelligence.
Iress has the benefit of sticky customers, with recurring revenue making up approximately 90% of all group revenue. Iress’ software is often integral to the day-to-day operations of its clients, which often makes replacing the software a costly exercise to be avoided.
However, this can also work against the company, as getting prospective clients to come over to Iress’ software can be difficult for precisely the same reasons.
The company’s Xplan
product is very popular with financial planning firms, allowing planners to better organise their client files. The product has been a strong source of earnings growth for Iress over the last decade.
With earnings growth for the coming year expected to be in the high single digits and a healthy dividend yield of around 4%, the recent pull back in Iress’ share price towards $11 may provide an opportunity for long-term investors.
Which Would I Choose?
I think both companies present as relatively attractive options for a well-diversified portfolio. Both offer a defensive income stream with a high proportion of recurring revenue and the recent share price falls have only served to make them more attractive going forward.
If forced to pick, I’d go with AusNet Services for its high quality energy assets and its stronger dividend, which is supported by strong cash flows.
For the names of other proven, dividend-paying companies, grab a copy of the free report below.
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At the time of publishing, Luke has no financial interest in any companies mentioned.
