3 ASX recession proof dividend shares

These 3 ASX dividend shares could be recession proof.

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With interest rates getting so low, I can understand why some people are looking for a safe source of income. Term deposits just won’t do it any longer. ASX dividend shares could be the answer.

However, if you are going to put your money into ASX shares, you may want to think about ideas that could be recession-proof so they don’t fall just went you need them most.

That’s why I think these three ideas are good ones to consider:

Duxton Water Ltd (ASX: D2O)

One of my favourite ‘alternative’ ideas away from banks and LICs for higher yield is Duxton Water, it’s a company which purely owns water entitlements and leases them out to agricultural businesses.

The value of water entitlements may go up and down over time, but it will likely be completely uncorrelated to the performance of the economy. But, it isn’t bulletproof of course – in a rainy year it’s likely that Duxton Water’s assets would fall in value.

Duxton is targeting steady growth of the dividend. It has just paid a 2.6 cents per share dividend and has guided a 2.7 cents per share and 2.8 cents per share dividend for the next 12 months. That means its forward grossed-up dividend yield is 5.4%.

Ramsay Health Care Limited (ASX: RHC)

Ramsay is one of the largest private hospital operators in the world. It operates a large network of facilities across Europe and Australia.

One of the useful things regarding healthcare is that people don’t get injured or sick based on economic cycles, so Ramsay may be able to rely on a relatively consistent level of demand, therefore generating reliable profit and have the ability to pay a consistent dividend.

The impressive track record of profit re-investment and acquisitions by Ramsay has allowed it to steadily grow its dividend every year since 2000. It currently has a grossed-up dividend yield of 2.9%.

Washington H. Soul Pattinson And Co. Ltd (ASX: SOL)

The only other business on the ASX to have increased its annual ordinary dividend every year since 2000 is Soul Patts, one of my favourite ASX businesses.

It’s an investment conglomerate that has been operating for over a century and invests in various businesses it thinks have good profit and cashflow growth potential.

Management are large shareholders of Soul Patts, so they aren’t going to take big risks with the company. The investment style is described as conservative and somewhat contrarian.

The increasing dividend is funded out of the normal cashflow of the business, being the dividends, distributions and interest it receives less the operating expenses. 

Soul Patts currently has a grossed-up dividend yield of 3.5%.

Foolish takeaway

Each of these businesses have a plan for dividend growth. If I could only pick one it would definitely be Soul Patts due to the flexibility of its holdings. However, all three could be good dividend options.

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*Returns as of May 24th 2021

Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended DUXTON FPO and Ramsay Health Care 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.

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