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2 ASX income shares with great growth prospects

Perhaps you’re approaching retirement, or have already said goodbye to your 9 to 5, or maybe you’d like to supplement your wage with a nice steady income stream?

Whatever your circumstances, if you’re seeking additional income, here are 2 top ASX dividend shares that I think are far better options than putting your money in a term deposit or savings account.

Wesfarmers Ltd (ASX: WES)

Wesfarmers’ core strength is the diversification it has across a very broad spectrum of the Australian economy. This provides it with some resistance to any industry-specific challenges.

It has operations in general retail segments including home improvement and outdoor living, and office supplies, as well as industrial segments such as chemicals and energy. Wesfarmers’ subsidiaries include household names such as Bunnings Warehouse, Kmart Australia and Officeworks.

It provides a good dividend yield of 3.6% that is fully franked, meaning that you will get a 30% tax rebate on the dividend. While its price-to-earnings (P/E) ratio of 25.8 is a bit on the high side for an income share, I think it is quite reasonable for a high quality company with excellent long-term prospects.

Wesfarmers has a strong track record of acquiring good quality businesses in a diverse range of market segments, and is also adept at selling any operations that are no longer sufficiently productive.

Wesfarmers also has exposure to the rapidly growing lithium market segment via its recent acquisition of lithium producer, Kidman Resources. Lithium is an essential ingredient for the hi-tech sector in areas such as electric vehicles.

Macquarie Group Ltd (ASX: MQG)

Macquarie is an Australian success story, with a strong track record of profitability over the last few decades. Australia’s largest investment bank continues to grow its revenue and net profit, while its cost-to-income ratio has been steadily declining.

Macquarie has become a more balanced and diversified business over the past few years, rather than one heavily focused on a small core group of operations, which was one of the reasons its share price was hit so hard during the global financial crisis (GFC).

Macquarie’s annual profitability growth has easily outperformed that of Australia’s big four retail banks – Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) – over the last 10 years.

Not only does Macquarie provide a good stream of income with a partially franked dividend of 4.2%, it also provides good share growth. I believe that the investment bank is well placed to outperform the S&P/ASX 200 (INDEXASX: XJO) over the next 5 to 10 years. It also currently is trading with an attractive P/E ratio of 17.1.

These 3 stocks could be the next big movers in 2020

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Motley Fool contributor Phil Harpur owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, and Westpac Banking. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of National Australia Bank Limited and Wesfarmers 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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