ASX dividend shares can be a great way to boost your income in this period of really low interest rates.
How are savers supposed to make any sort of money from their cash if interest rates are almost at 0%?
If people need more income then a strategy could be to put some of it into dividend stocks to boost the overall yield.
Future Generation Investment Company Ltd (ASX: FGX)
Future Generation is a very interesting listed investment company (LIC).
The role of a LIC is to invest in other shares and assets on behalf of its shareholders.
Future Generation doesn’t directly invest into ASX shares. Instead, it makes investments into funds that target ASX shares. Future Generation only chooses to invest into the funds of the best Australian fund managers. Those managers work pro bono, meaning they work for free for Future Generation.
Why would they work for free? Future Generation was set up to donate 1% of its net assets each year to youth charities. That’s where the ‘future generation’ part of the ASX dividend share’s name comes in.
The portfolio has outperformed the S&P/ASX All Ordinaries Accumulation Index with less volatility. Since September 2014, the Future Generation portfolio has returned an average of 10.5% per year (before donations etc), compared to the index average return of 8.3%.
In terms of being a dividend investment, Future Generation has been steadily growing the dividend since it listed. It currently offers a fully franked yield of 3.9%.
At the latest Future Generation share price, it’s at an 8% discount to the net tangible assets (NTA) – the underlying value – at 30 April 2021.
Adairs Ltd (ASX: ADH)
Some ASX dividend shares have performed very strongly since the start of COVID-19. A few of those trends are now slowing down, or even reverting a bit.
But I think Adairs has a very promising future, which could translate into a solid and growing dividend over time.
Adairs has seen a high level of margin growth and profit growth. But it’s the future plans and valuation of the home furnishings business that particularly interests me.
The ASX dividend share is working on being able to offer customers a good experience in-store or online, particularly through its Linen Lover membership. It’s working at being more efficient throughout the business. Adairs is achieving good growth with its Mocka brand. Adairs is making its stores more profitable, with one strategy being to upsize them which generates more margin and profit. It’s also working on its supply chain with a new national distribution centre.
According to CommSec, at the latest Adairs share price it’s valued at 13 times the estimated earnings for the 2022 financial year. The forecast fully franked yield for the 2022 year is 5.25%.
