ASX dividend shares are in high demand these days because income from other sources is drying up.
Rent from properties isn’t secure with the COVID-19 impacts and interest from bank accounts are now low too. ASX dividend shares could be the right answer because they can pay a pleasing starting yield that can continue to grow over time.
There aren’t many dividend shares I’d trust to keep paying dividends at the moment, particularly the banks. But these two could be great:
WHSP (ASX: SOL)
WHSP is an investment house that owns a diversified portfolio of shares. In terms of dividend reliability it is probably the best the ASX has to offer. It has increased its dividend consecutively for 20 years in a row! No other ASX dividend share has that type of record after Ramsay Health Care (ASX: RHC) suspended its dividend due to COVID-19.
WHSP is invested in long term holdings like Brickworks (ASX: BKW), API (ASX: API), New Hope
(ASX: NHC) and BKI (ASX: BKI). This portfolio passes through pleasing investment income up to WHSP each year, which it can then pay most of it to shareholders whilst keeping a bit for new investment opportunities.
I like WHSP for dividends during COVID-19 because its largest sources of dividends will hopefully, largely, be unaffected by COVID-19. New Hope’s dividend is reliant of coal prices rather than the economy. TPG (ASX: TPG) earnings should be resilient as everyone needs to keep paying their telco bill. Brickworks’ dividend is funded just from its own WHSP investment and the rental income from a property trust.
WHSP offers a fully franked dividend yield of 3%.
BWP Trust (ASX: BWP)
This is a real estate investment trust (REIT). Most of its portfolio are warehouse properties that are leased to Bunnings. It owns 68 of them. There are also a few other largeproperties that are, or will be, leased to other retailers aside from Bunnings.
The portfolio has attractive metrics like a weighted average lease expiry (WALE) of 4.3 years and 97.5% occupancy.
Approximately 57% of BWP’s rental income is subject to CPI inflation growth, and 43% is subject to fixed annual rental growth.
Bunnings has been solid during COVID-19, so BWP Trust hasn’t had to worry about rental income materially dropping.
BWP has been steadily growing its ordinary distribution for investors over the long term. BWP Trust offers investors a yield of 4.6% based on the FY20 distribution.
Summary
I think dividends from both of these potential investments looks good over the next year. I think I’d prefer WHSP because of the wider diversification, whereas BWP Trust is just about Bunnings warehouses properties. Other dividend share ideas to look into can be found here.
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