Dividends are one of the most pleasing aspects about investing in shares. It’s so satisfying to do no work for the companies you own, yet receive a dividend every six months.
Not only that, but the income on offer from many ASX shares is a lot higher than you could possibly get from all the various bank accounts that are out there. Even the best ones only offer an interest rate of around 2.8% to 3%.
So, to solve that income dilemma, here are four excellent income shares on the ASX:
WAM Capital Limited (ASX: WAM) – $2,000
WAM Capital is the largest and oldest listed investment company (LIC) run by Wilson Asset Management. It has performed very well, its portfolio performance over the past five years has been an average of 14.8% per annum before fees.
It looks for undervalued growth companies and also tries to find value arbitrages and market mispricing opportunities. I also like that the LIC generally keeps a lot of cash on hand for safety and opportunities, in its March 2018 update it stated that 31.9% of its portfolio was in cash.
It’s currently trading at a significant premium to its NTA, which is why I’d only allocate $2,000 today. It has a growing grossed-up dividend yield of 9.12%
Rural Funds Group (ASX: RFF) – $1,500
Rural Funds Group is a real estate investment trust (REIT) that only invests in farmland. I think it’s the best REIT option on the ASX because farmland will continue to be useful for many decades to come and it doesn’t depreciate in value like office buildings or warehouses do.
Management have a long-term goal of growing the distribution every year by 4%, which it has achieved so far. It’s currently trading with a distribution yield of 4.7%. It’s trading at a big premium to its NTA, which is why I’d only invest $1,500 at today’s price.
InvoCare Limited (ASX: IVC) – $4,000
InvoCare is the largest funeral provider in Australia, however its share price has been coming under pressure recently because profit won’t be growing in the near future due to investments it’s making.
However, management believe that the upgrades will lead to its market share growing up to 40% and help it grow earnings in the long-term.
It’s currently trading with a grossed-up dividend yield of 5.7%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – $2,500
Soul Patts is the oldest investment company on the ASX having operated for over a century. It is closest thing on the ASX to Warren Buffett’s Berkshire Hathaway in that it makes large, long-term investments into businesses it believes will deliver good compound growth.
It has increased its annual ordinary dividend every year since 2000 and the dividend is currently 4.1%, grossed-up.
I like all four of these dividend shares, which is why I’m a shareholder in three of them. I believe there’s a really good chance they will all continue growing their income as long as there isn’t another GFC.
An even better income option could be this exciting dividend share, which just grew its dividend by more than 25% and is predicting profit growth of 30% this year.
It's been a nail-biter of a reporting season here in the first half of 2018.
But the real action, in my opinion, is what companies are doing with dividends.
What does this mean for you? Well there is one stock I've found that could very well turn out to be THE best buy of 2018. And while there's no such thing as a 'sure thing' when it comes to investing - this ripper might come as close as I've ever seen.
Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. 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 Scott Phillips.