Every investor worth his or her salt knows that the big four ASX banks have something of a reputation for large dividend payments. Although this reputation has taken a beating in 2019 with both Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) reducing their shareholder payouts, all 4 of the big banks still offer yields north of 5% on current prices.
Commonwealth Bank of Australia (ASX: CBA) remains the only major ASX bank not to have delivered a dividend or franking cut this year. Today, CBA shares offer a yield of 5.34%, which grosses up to 7.63% with franking. This is a princely sum to be sure, but the headwinds currently buffeting the banking sector don't give me much confidence that this payout will grow anytime soon.
I would much rather own these 2 ASX dividend growth shares instead!
CSL Limited (ASX: CSL)
Health care giant CSL already has a reputation as one of the best ASX growth companies to own – but I've been watching its quietly growing dividend as well. CSL only started sending cash out the door in 2013, but has already built up a nice track record for increasing this dividend since.
In fact, between 2013 and 2019, CSL went from paying out US$1.02 per share to US$1.85 – a compounded annual growth rate of 10.43%. If you plan on buying CSL shares today and holding for years to come, I think you'll end up with a formidable yield-on-cost before you even notice!
REA Group Limited (ASX: REA)
REA is hardly a household name, but I'm sure most people in Australia have heard of its flagship website platform realestate.com.au. This company has benefitted enormously from the boom in property prices over the past decade, but I feel confident that the company is now big (and wide) enough to profit in any market conditions. Its diversification into the home loan and property data segments is also a very welcome one, in my view.
REA is also a dividend growth beast – increasing its shareholder payouts from 36.5 cents per share in 2013 to $1.18 per share this year. That translates to a compound annual growth rate of 21.6%. Again, at this rate (if continued) it would only take a few years before you would be getting a sizeable chunk of your initial REA investment back each year in dividend form.
Foolish takeaway
Although blue-chip ASX shares like CBA offer huge yields upfront, I'm far more excited about dividend growth shares like CSL and REA for the long term. Thus, if you have a few years left in your investing horizon, these kinds of companies could well be worth a look for your own portfolio.
