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Why I love ASX dividend shares

ASX dividend shares are wonderful in my opinion. They could be the antidote to the non-existent interest income we’re seeing right now from interest-related investments like bonds.

Dividends take the guesswork out of investing

ASX dividend shares can sometimes be as volatile as normal shares.

It’s hard to say what share prices will do over the short-term or even the medium-term. That’s pretty tough if you are relying on making capital gains for your returns.

But dividends are usually much more consistent. The board of directors decide what the level of dividend will be each year after taking into account a number of factors.

If you just focus on the dividends then you might be able to handle the volatility of the share market better because, it’s just a temporary noise in terms of the whole market.

Good dividend yields

Each ASX dividend share has a different yield depending on how much of their profit they pay out and how expensive the share price is.

There are some businesses that have lower but consistently growing yields like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), MFF Capital Investments Ltd (ASX: MFF) and Brickworks Limited (ASX: BKW).

There are also some other ASX dividend shares that have higher yields like WAM Microcap Limited (ASX: WMI), Future Generation Investment Company Ltd (ASX: FGX) and Charter Hall Long WALE REIT (ASX: CLW).

Franking credits

A unique benefit of Australian dividend shares is that the taxation systems means that Aussies who receive fully franked dividends from companies get their yields topped up by franking credits. It’s basically a refund of the tax paid by the company, allocated to Australian tax residents. It either reduces the taxes owed or can result in a refund on your tax return. Normally, the franking credit rate is 30%, so a $7 fully franked dividend becomes a $10 dividend including the franking credits.

Dividends and profit re-investment

Many ASX dividend shares have a healthy approach when it comes to dividend payout ratios.

When a business makes profit, if it doesn’t pay out 100% of the profit then that retained amount can be re-invested back into the business for more growth, more profit and higher dividends in the future.

Business profits can be used for both paying a dividend and funding growth.

Summary thoughts about ASX dividend shares

I think ASX dividend shares are a great way to boost income whilst also benefiting from long-term capital growth.

At the moment my preferred picks would be MFF Capital and then perhaps Brickworks if the construction recovery can be sustained. Though it’s hard to look past WHSP as a key long term idea.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

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Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Jaz owns shares of WHSP, MFF Capital, Future Generation and WAM Microcap.
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