ASX dividend shares with solid yields could be particularly attractive in October and beyond if they can deliver good passive income and long-term capital growth.
It’s understandable why the market is a bit jittery – inflation continues to remain elevated compared to the rest of the last 20 years, and interest rates are the highest they have been for a number of years. Interest rates are meant to act like gravity – the higher they go, the harder they pull down on valuations.
Lower share prices could be an opportunity in this environment, particularly when it comes to businesses paying dividends (and distributions).
Charter Hall Long WALE REIT (ASX: CLW)
This is one of the most diversified real estate investment trusts (REITs) on the ASX. It’s invested across agri-logistics, hospitality, service stations, retail, industrial and logistics, offices and social infrastructure.
The properties are varied, but they all have one thing in common – they have long rental leases. That’s why the business has a weighted average lease expiry (WALE) of around 11 years, which provides long-term income security.
The REIT says that 99% of its tenants are blue chip, meaning government, ASX-listed, multinational or national. I think they will be able to keep their rent during difficult times.
While the cost of debt has gone up, the ASX dividend share’s income is rising as well. It said that in FY23, 51% of leases were linked to CPI with a 7.1% weighted average increase, while 49% of leases are fixed with an average fixed increase of 3.1%.
In FY24, it’s expecting to pay an annual distribution per share of $0.26, which equates to a distribution yield of 7.8%. That level of return is strong, and means we don’t need to worry too much about what the net tangible assets (NTA) are compared to the share price – we’re clearly getting a good rental return on the share price.
Telstra Group Ltd (ASX: TLS)
Telstra is the clear market leader in Australian telecommunications. Its profit growth outlook seems more likely than the ASX banks.
The telco is passing on price rises to consumers, so it’s benefiting from inflation, whereas the banks may soon suffer from rising arrears and bad debts, as well as lower demand for credit.
We’re seeing profit growth from Telstra, which is helping fund bigger dividends to shareholders.
The return of international tourists paying roaming charges, as well as Australia’s growing population, is providing a boost to the ASX dividend share’s revenue and earnings.
Using the FY23 payout of 17 cents, that’s a dividend yield of 4.4%, and 6.3% when we include the bonus franking credits. I’m expecting more dividend growth in FY24 and beyond.
I think Telstra has a good chance of providing a mixture of capital growth and dividend income.
