3 ASX dividend shares I’d buy before the banks

The big four ASX bank shares are still trading at a significant discount to their pre-COVID levels. Despite this, I hold some concerns regarding the macroeconomic climate that these banks operate in.

If you’re looking for dividends, I think there are some other ASX shares that operate in more favourable conditions right now.

Recap on why I’m avoiding the ASX banks for now

I recently wrote an article that explains why I’m avoiding the big four ASX banks for the moment. To summarise, banks have had a tough run recently, and I think the full effects of COVID-19 have yet to be seen.

A low-interest-rate environment and increasing competition from innovative new fintechs will continue to put further pressure on the margins of commercial banks.

So, here are 3 other ASX dividend-paying shares I’m interested in right now.

Washington H. Soul Pattinson and Co

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is a diversified investment company that has significant stakes in multiple unlisted and listed companies. Some of its holdings include a 19.3% stake in Australian Pharmaceutical Industries Ltd (ASX: API), a 12.6% stake in TPG Telecom Ltd (ASX: TPG) and a 43.9% stake in Brickworks Limited (ASX: BKW).

WHSP boasts an impressive track record of consistently paying out dividends to its shareholders. Since 1992, WHSP has been able to grow its dividends at an annual compound growth rate of 9.6% after being adjusted for inflation.

Magellan Financial

Magellan Financial Group Ltd (ASX: MFG) is a publicly owned investment manager with over $102.1 billion funds under management (FUM). Taking a look at the income statement, Magellan has had a fantastic track record of being able to grow its earnings over recent years, which has allowed the company to increase the number of dividends it’s been able to distribute to its shareholders.

In FY20, Magellan was able to pay $2.14 per share (75% franked) in dividends to its shareholders. Outperforming the broader market has helped grow its FUM and ensure that investors are rewarded. I like the future growth trajectory of the company and for this reason, I’d happily pick up some shares for the dividends.

BHP Group

BHP Group Ltd (ASX: BHP) remains a long-time favourite for those seeking a stock that pays a consistent dividend. Despite the effects of COVID-19, BHP was able to pay a total annual dividend of US$1.20 per share in FY20. This is the third year in a row the company was able to distribute over US$6 billion in dividends to shareholders.

Global uncertainty will cause some short-term volatility in commodity prices, but I am confident in management’s ability to allocate capital efficiently towards investing in new projects and acquisitions. This should generate larger returns for shareholders in the long-term.

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At the time of publishing, Patrick does not have a financial or commercial interest in any of the companies mentioned

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