With trade war tensions resuming, gold smashing through a record high for us Aussies and interest rates going down over in the US, August has definitely gotten off to an interesting start. Uncertainty is all around us, and this includes (as always) the share market. Although the ASX has recently surpassed its all-time high, in my view it’s a time to exercise great caution when deploying cash into the current market.
Saying this, here are two dividend ideas for August. Both offer solid and safe dividend yields (in my opinion) and both would lend some healthy ballast to a portfolio.
Transurban Group (ASX: TCL)
Transurban owns and operates a vast series of toll-roads across Australia as well as a few in North America. There are a few reasons I really like Transurban as a defensive dividend share. With capital city congestion (particularly in Sydney and Melbourne) getting worse every year, the incentives to use Transurban’s roads are only rising – especially with population growth.
Also rising are the tolls that Transurban charge motorists for the privilege of using its roads. Transurban’s motorways are governed by government contracts that allow annual toll rises of 4% or at the rate of inflation – whichever is higher. As inflation has been well under 2% for the last few years (and no signs of this easing), Transurban has been able to bank real rates of return here and I expect this to continue for some time. Transurban is offering a dividend yield of 3.68% on current prices.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
‘Soul Patts’ as it is commonly known, is an ASX investment company that has been described as the ‘Berkshire Hathaway of the ASX’. This enviable title hails from the diverse portfolio of quality ASX businesses that Soul Patts owns.
These include TPG Telecom Ltd (ASX: TPM), New Hope Corporation Limited (ASX: NHC) and Brickworks Ltd (ASX: BKW). Unlike Berkshire though, Soul Patts also pays a dividend, which has been rising every year since 2000 (a record almost unmatched on the ASX). On current prices, SOL shares are yielding a 2.61% dividend, but if you throw in franking credits, this rises to 3.73%.
Both of these ASX dividend shares are quality companies that, in my opinion, offer investors a solid and reliable income base for a portfolio. I expect that both will be able to keep raising shareholder payouts for the foreseeable future, making them fantastic long-term holds. I like SOL shares a bit more from a price perspective right now, but TCL’s 3.68% yield is still a big improvement over a term deposit.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Transurban Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks. 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.