With low (and probably getting lower) interest rates and an unpredictable property market, ASX dividend-paying shares have definitely become 'in vogue' over the past year or so. Locking in good, sustainable yields is the top of most income investors' minds as cash investments, bonds and term deposits continue sliding into uselessness. When it comes to dividends, I like to think of what a company will pay me both today and tomorrow, as a princely yield today can quickly become a pauper down the road – just ask anyone who bought Telstra Corporation Ltd (ASX: TLS) shares a couple of years ago.
Here are two ASX dividend-paying shares that I think are top income stocks right now.
Coles Group Ltd (ASX: COL)
Coles shares hit a post-float high today of $14.21, which I think reflects the market's confidence in both the impending dividend and the solid earnings base that Coles offers its shareholders. After announcing an ambitious cost-cutting program earlier this year – involving supply-chain automation and strategic partnerships – investors are seeing a lot of promise in this grocery chain's defensive earnings base. The recently launched 'Little Shop 2' range should also give Coles a short-term revenue boost as well as an opportunity to cement some market share. I expect Coles' first dividend should give a yield of around 4% on current prices and Coles' stated 80–90% payout ratio target.
Transurban Group (ASX: TCL)
Transurban has been drawing a lot of investors in this year (TCL shares are up 34% YTD) due to its monopolistic earnings base and rock-solid dividend. Transurban owns or operates toll-roads across our capital cities as well as in North America. Sydney readers would be very familiar with its toll-road network, which has just been bolstered by the opening of the M4 East tunnels earlier this month. With ever-rising congestion in our cities, I expect Transurban to continue to profit from its tolled motorways (and inflation-linked price rises) as motorists dodge the traffic lights for a quicker trip. Transurban is currently yielding a dividend of 3.8%.
Foolish takeaway
Both of these businesses have a solid and defensive earnings base that should ensure dividends keep flowing, no matter the economic weather outside. Although both companies are now priced at a premium for this perceived privilege, the yields still smash what you could expect from a bond or term deposit, so may still be worth the price if you are hungry for income.
