As an income investor, I love a good dividend yield. But more importantly, I look for companies with sustainable yields, which can afford to keep paying shareholders a strong level of income. It’s no use getting a high income today if the dividend is at risk of being cut severely.
Here are 3 ASX companies which I think have strong and sustainable yields.
Spark Infrastructure Group (ASX: SKI)
Spark owns regulated utility assets. Specifically, electricity networks in three states, including Victoria Power Networks, SA Power Network and TransGrid.
The company has strong and reliable cashflow which is inflation protected, and this gives Spark the ability to pay sustainable income to shareholders. Since 2011, the distribution has increased every year and is forecast to increase another 4.9% this year.
Spark shares currently trade on a distribution yield of 6.6%.
Growthpoint Properties Australia Ltd (ASX: GOZ)
This real estate investment trust (REIT) has been a good performer since the GFC.
Growthpoint owns a large portfolio of office and industrial properties worth over $3 billion. The portfolio has a strong cashflow profile and contracted rental increases which average 3.3% per annum.
It has been regularly increasing distributions for shareholders over the years, with the most recent payment increasing by 3.3%, and the company has just guided for FY19 distribution growth of 3.6%.
Growthpoint shares currently trade on a yield of 6.2%.
WAM Research Limited (ASX: WAX)
WAM Research is a listed investment company which focuses on small and medium-sized companies, which the investment team believes are undervalued and have strong business fundamentals.
Performance has been solid since 2010, with portfolio returns before fees of 16.7% per annum, beating the market’s 8.4% per annum.
Gains are continually harvested and the company pays out large fully franked dividends from these profits. There’s currently 3 years worth of dividend payments in the ‘profit reserve’ which means the next few years of dividends are already covered, so the chance of a dividend cut is very small.
WAM Research shares currently trade on a yield of 9.7% including franking credits.
Where to invest $1,000 right now
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Motley Fool contributor Dave Gow owns shares of Growthpoint Properties Australia and WAM Research Limited. 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 Scott Phillips.
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