One of the best things about investing in ASX shares is the healthy dividends they provide. In my opinion, shares are one of the best ways to get a growing stream of passive income due to the effects of compounding. All you have to do is pick the right shares, reinvest dividends and throw in some time.
Here are three ASX dividend payers that (in my opinion) would make for great passive income shares.
InvoCare Ltd (ASX: IVC)
InvoCare is Australia's largest provider of funeral services. With more than 220 funeral parlours and crematoria, InvoCare has built itself an empire in the otherwise fractured and decentralised funeral services industry. Unfortunately, death is an inescapable part of life and InvoCare has built a name on quality services in this area that its customers appreciate. Until 2018, InvoCare had paid a rising dividend every year since 2005, but the company was forced to trim back the dividend by 20% last year due to unexpectedly lower cash flow. However, this looks to have been a temporary problem, and I expect that InvoCare's dividend growth will resume this year. InvoCare shares are currently yielding 2.24%.
Coles Group Ltd (ASX: COL)
Coles is a name everyone will be familiar with as our second-largest Australian supermarket chain. I like Coles due to its lowest-cost reputation ('down, down') and defensive traits. Coles is also investing heavily in supply chain cost reduction and automation, which should ensure costs will continue to decrease for the next few years. Coles has yet to pay a dividend in its own right, but the company has announced that it plans on paying out between 80–90% of profits. This should result in a dividend yield of between 4–5% going forward, which should also include full franking credits.
Fortescue Metals Group Limited (ASX: FMG)
Fortescue is our third-largest mining company on the ASX, and one that has performed extremely well over 2019 so far due to the surging price of iron ore. Although probably not a good pick for consistent income, Fortescue is committed to paying out a proportion of all profits generated as dividends, which may result in more 'special dividends' if iron ore prices hold up. Fortescue investors have already done very well over the last financial year, with FMG shares yielding more than 10% (before franking) over FY19. Although this may not continue going forward, everything moves in cycles and Fortescue is well placed to take advantage of a further upswing.
Foolish takeaway
All of these shares would make a great investment (in my opinion) if you're looking for passive income. Fortescue is the more risky pick at today's prices due to its reliance on iron ore prices, but all three of these shares are quality businesses you might want to consider owning for passive dividend income.
