If I had $1,000 to invest to invest into an ASX dividend share, I think I’d go for Brickworks Limited (ASX: BKW).
What’s Brickworks?
Brickworks has been around for decades and it’s currently around $3 billion in size.
It sells a variety of construction products that are used in residential or commercial buildings. The company has bricks and pavers, with Austral Bricks having a key position. It’s the market leader in bricks in Australia. There are plenty of other divisions including masonry (with Austral Masonry). It has a precast business called Austral Precast. Roofing is another important segment with Bristle Roofing.
On top of that, Brickworks also owns some US brickmakers including Glen Gery.
The company suffered during the COVID-19 restrictions as activity slowed and some workplaces came to a stop. But now Brickworks is seeing a recovery in the first quarter of FY21.
Why is it a good ASX dividend share?
Brickworks could be considered as one of the best dividend ideas on the ASX. But construction isn’t a super-consistent industry that would allow Brickworks to keep paying a reliable dividend.
It’s Brickworks’ other assets that provide the funds for the company to pay its regular dividend. Its non-building products assets actually make up the majority of the underlying value of the business.
There are two segments that provide the annual dough needed to pay for the dividend. It owns around 40% of the investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which has grown its dividend for the past 20 years in a row. That business owns an array of different assets including shares like TPG Telecom Ltd (ASX: TPG), Brickworks itself and Bki Investment Co Ltd (ASX: BKI).
Brickworks also has a 50% share of an industrial property trust jointly with Goodman Group (ASX: GMG). Commercial real estate offers consistent income with quality tenants and long term growth. It’s also currently building large warehouses for both Amazon and Coles Group Ltd (ASX: COL) which is expected to boost the distributions from the trust to Brickworks by at least 25%.
What makes Brickworks a particularly attractive ASX dividend share is that it has maintained or grown its dividend every year for over 40 years. Its trailing fully franked dividend yield is sitting at 3%.
There are also some other ASX dividend shares I’ve got my eyes on including APA Group (ASX: APA) and Magellan Financial Group Ltd (ASX: MFG).
