If you're a retiree or someone who relies on dividends as a major part of your income, you would be very familiar with our current interest rate environment (and cash not being anything close to king). Bonds, term deposits, savings accounts… they all get you next to nothing for your efforts (except perhaps reasonable capital preservation).
So we are stuck with property, gold and shares as the only mainstream investment vehicles. Gold has no yield, so that one's gone and unless you have a spare $100,000 lying around, property isn't an easy fix either. That leaves dividend-paying shares as our best hope in this low-yield world.
So here are three ASX dividend-paying shares that I would personally consider for an income portfolio.
Westpac Banking Corp (ASX: WBC)
Westpac is one of the oldest companies on the ASX and our oldest bank – starting life as the Bank of New South Wales back in 1817 (yes, Westpac turned 200 in 2017). As one of the 'Big Four' ASX banks, Westpac enjoys considerable brand recognition, pricing power and a sticky customer base. Westpac currently pays a whopping 6.73% dividend yield, which gets bumped up to 9.61% if you include the value of full franking credits. I wouldn't put all of my eggs in the Westpac basket, but with this yield, WBC shares would form a great backbone of any income portfolio.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
Sydney Airport holdings owns… you guessed it – Sydney's Kingsford-Smith International Airport. As the only commercial international airport in the state (at least for the moment), Sydney Airport basically has a monopoly on the state's airspace. The company is also able to extract extra value from the infrastructure in Sydney airport, such as parking spaces, taxi ranks and intra-airport retail space. This gives the company a fantastic defensive 'moat' that should reasonably protect its earnings in all economic weather as well as providing a rock-solid dividend. SYD shares are yielding a 4.74% dividend on current prices.
Caltex Australia Limited (ASX: CTX)
Caltex is a petroleum refiner (you're probably familiar with its fuel stations) but also operates retail convenience stores that often accompany its bowsers. The Caltex share price has been beaten down considerably over the past two years, but I still think Caltex could be a solid income stock pick – after all, until electric cars take over, we all still need to fill up our cars and trucks. Caltex is currently yielding a 4.56% dividend, which goes up to 6.5% including franking credits.
Foolish takeaway
All of these companies pay a dividend that at least doubles what you would get from a term-deposit or government bond today. Of course, you don't get the kind of capital preservation that fixed-interest investments can provide, but at the end of the day, there's no free lunch. If you do go with dividend shares, all three of these companies would (in my opinion) be a good place to start.
