There are a lot of shares on the ASX, but not many of them are good options for dividend income. Some shares have big dividend yields, but that doesn’t necessarily mean they’re safe yields or going to grow. It could be a good strategy to buy shares of investment businesses which pay out a good dividend, even if the underlying portfolios don’t receive a lot of dividend income. The biggest listed investment company (LIC), Australian Foundation Investment Co. Ltd (ASX: AFI), has been a good choice for decades, but its returns are quite similar to the index these days…
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There are a lot of shares on the ASX, but not many of them are good options for dividend income. Some shares have big dividend yields, but that doesn’t necessarily mean they’re safe yields or going to grow.
It could be a good strategy to buy shares of investment businesses which pay out a good dividend, even if the underlying portfolios don’t receive a lot of dividend income.
The biggest listed investment company (LIC), Australian Foundation Investment Co. Ltd (ASX: AFI), has been a good choice for decades, but its returns are quite similar to the index these days and the dividend yield is lower.
So, it may be worth looking at shares which are quite new to the market, such as these:
NAOS Absolute Opportunities Co Ltd (ASX: NAC)
This is a LIC run by NOAS Asset Management. It has a number of pleasing characteristics, it concentrates on small to mid-cap stocks which are between $400 million to $1 billion with an industrial bias.
It has a sustainable dividend growth policy, having grown the dividend every since inception. It owns a very concentrated portfolio, which focuses on quality not quantity. The investment team uses an environmental, social and governance screen across its investments.
The portfolio has grown by an average of 18.63% per annum over the past three years and it currently has a grossed-up dividend yield of 6.84%.
WAM Leaders Ltd (ASX: WLE)
WAM Leaders is one of the newer and large LICs run by Wilson Asset Management. Its portfolio focuses on the S&P/ASX 200 Index and the LIC aims to provide long-term capital growth and a good source of dividends.
It aims to beat the returns of the S&P/ASX 200 Index, which over the last year has returned 14.6%. Whereas the WAM Leaders portfolio has returned 18.1%, which is a decent outperformance.
WAM Leaders currently has a grossed-up dividend yield of 3.69%.
Magellan Global Trust (ASX: MGG)
This is a listed investment trust (LIT) which has been recently launched by Magellan Financial Group Ltd (ASX: MFG).
The aim of the trust is to closely match the high-performing investment strategy of the unlisted global fund strategy, whilst providing access to ASX investors and offer a decent yield. It aims to pay to pay a 4% yield based on the net asset value.
This trust is a really good option for those investors who have little exposure to overseas companies like Apple, Alphabet (Google) or Facebook.
At the current price of the market and the current prices of the above shares, I’d only be happy to buy NAOS Absolute Opportunities and Magellan Global Trust, as I believe the large end of the Australian share market could see some trouble over the next year.
Another great option for income could be our top dividend pick for FY18, which is growing strongly in Asia.
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Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.