If I were investing $1,000 into ASX dividend shares, there are a few that I’d want to choose.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
WHSP may be the best long term ASX dividend share – it certainly has an ultra long term record when it comes to dividends. It was listed in 1903 and it has paid a dividend every year since then, including through the world wars and major recessions. Plus, WHSP has grown its dividend in consecutive years over the last two decades.
I think WHSP is a particularly good one to own because it owns a bunch of uncorrelated assets that can keep making profit in tough times. For example, TPG Telecom Ltd (ASX: TPG) kept producing profit during the locked-down 2020 year as people kept using their home internet for entertainment and work. Brickworks Limited (ASX: BKW) kept receiving rent at its industrial properties (and WHSP paid its dividends to Brickworks). And so on.
WHSP has very good diversification and a quality portfolio of unlisted assets as well, which it can grow using its own funding. Resources (Round Oak), agriculture and luxury retirement living are three areas of focus for the private business portfolio.
However, due to the demand for quality ASX dividend shares, the WHSP share price has been pushed up and the fully franked yield is now only around 2%.
MFF Capital Investments Ltd (ASX: MFF)
MFF Capital is a listed investment company (LIC) – it looks for high quality overseas shares that have good growth potential and are trading at attractive value.
One of the main reasons I like LICs over ETFs is that they can decide the level of dividends to pay, and that the dividends can be paid from capital gains profit, not just the dividends paid to it. That’s helpful for making LICs a solid ASX dividend share choice, if it’s a good investment.
MFF Capital has a strong portfolio and it can decide to borrow a little bit if it wants to boost the return, pushing the cash into a slight net debt position. Net debt was 2.8% of the portfolio at 19 March 2021.
Some of its biggest holdings include Visa and Mastercard, which are benefiting from the huge and continuing trend of payments going digital.
The MFF board, which includes portfolio manager Chris Mackay, has stated an intention to raise the half-yearly dividends to 5 cents per share. At the current MFF share price, that translates to a fully franked dividend yield of 3.8%. If investment returns can continue to remain strong over the long term, then that dividend could keep growing.
Another benefit of LICs is that you can essentially buy a basket of shares worth $1 for less than $1.. MFF’s pre-tax net tangible assets (NTA) per share was $2.95 on 19 March 2021, compared to the current share price of $2.62 – a discount of 11%.
Summary thoughts
I think these are two of the best ASX dividend shares right now, though the WHSP share price is a bit expensive compared to the underlying value of its portfolio. However, MFF Capital looks like it could be a solid pick for income for the 2020s.
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