As those of you who are income investors would know, share prices (whilst handy to keep an eye on for top-ups), are less important than regular and rising dividends. As any income investor who has been around a while would also know, recessions can be a scary time if your primary source of income is dividends. If a company's earnings get smashed, it becomes difficult to maintain, let alone increase the dividend.
Here are three ASX dividend paying shares that are not likely to see any material drop in earnings if the economy experiences a recession.
Coles Group Ltd (ASX: COL)
Shares of this supermarket giant are hitting post-float record highs this week after the company announced a cost-cutting program as well as a well-received 'plan for the future' (involving automation and renewed customer focus). Discount groceries are something that actually might be in more demand if the economy goes south. Coles are expected to pay out a healthy 80-90% of earnings for its first dividend, making it a great all-weather income stock in my view.
Australian Foundation Investment Co Ltd. (ASX: AFI)
Shares of this 'old school' Listed Investment Company (or LIC) are a famously conservative investment. AFIC has built a name for itself over the past 91 years as a bastion of slow-building wealth accumulation. By investing in the best blue-chip shares on the ASX, AFIC boasts a formidable cash war chest that it can use to keep the dividends rolling out even when things are looking bleak, which it did during the GFC. AFIC's grossed-up yield of 5.4% is one of the safer income streams on the ASX (in my opinion) and definitely worth a look.
Rural Funds Group (ASX: RFF)
Rural Funds Group is a REIT (real-estate investment trust) specialising in farmland, including cotton, nuts, cattle and vineyards. Agriculture and food production has been a rock-solid investment for most of human history and even if things go pear-shaped, 'we still all gotta eat'.
Rural Funds' average farm lease is over 13 years, with many having inflation clauses written in. This has enabled the company to increase its dividend annually since listing in 2014 and is currently yielding 4.1%. Being a REIT, RFF dividends do not come with franking credits attached, which is something to keep in mind.
Foolish Takeaway
For income investors, safe and secure dividends should be an important consideration and all of these shares offer just that. With the share market reaching new highs lately, it might be a good time to take some profits and consider rebalancing or putting some cash aside for buying opportunities.
