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Why I’d buy this little-known ASX blue chip dividend share for income

Australian United Investment Company Ltd (ASX: AUI) is a little-known ASX blue chip dividend share.

How can it be a blue chip if hardly anyone knows what it is? Well, it’s been operating for over sixty years. I think any business that has an operational track record of over six decades is worth saying it’s pretty much a blue chip.

But AUI is actually a listed investment company (LIC) which invests in the ASX’s large blue chips. So through its underlying holdings it’s essentially a blue chip itself.

At the end of September 2019 its largest holdings are Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), Transurban Group (ASX: TCL) Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP).

It also owns some smaller businesses that offer more growth potential like SEEK Limited (ASX: SEK), Event Hospitality and Entertainment Ltd (ASX: EVT), Orica Ltd (ASX: ORI) and InvoCare Limited (ASX: IVC).

The reason why it could be called a really good dividend share is that it has maintained or grown its dividend every year since 1993. That’s great income security for shareholders. AUI has grown alongside the Australian economy over the past three decades.

At the end of September 2019 it had pre-tax net tangible assets (NTA) of $9.92 per share, meaning it’s trading at a 6% discount to the NTA. Operating expenses were only 0.10% of the average market value of the portfolio in FY19, it’s one of the cheapest ways to be invested in an ASX portfolio investment.

Foolish takeaway

AUI has a grossed-up dividend yield of 5.5%. It’s a solid yield and if I were trying to get exposure to large cap ASX blue chips this might be my preferred way to do it.

But for dividends I reckon these leading ASX income shares are even better long-term options with more growth potential.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Transurban Group. The Motley Fool Australia owns shares of Event Hospitality & Entertainment. The Motley Fool Australia has recommended InvoCare Limited and SEEK 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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