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4 top ASX dividend shares for income investors in February


Top ASX dividend shares are in high demand from income investors.

Dividends can be a great way to fund your desired lifestyle. Cash in the bank just isn’t cutting it any more.

Here are four great ideas to boost your income:

Service Stream Limited (ASX: SSM) 

Service Stream provides integrated, end-to-end asset life-cycle services across essential infrastructure networks with in the telecommunications and utilities sectors. It’s involved in design, construction, maintenance and operations.

It recently reported its FY20 half-year result which showed all profitability measures rose compared to last year, with adjusted earnings per share (EPS) up 14%. It is winning new contracts and has a pipeline of development opportunities. It’s also looking at external growth and diversification opportunities.

Service Stream also grew its interim dividend by 14% to 4 cents per share. That brings the trailing grossed-up dividend yield to 5.8% due to the share price fall after the report.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) 

I think Soul Patts is the gold standard for dividends on the ASX. Why? It has grown its dividend every year since 2000, it has paid a dividend every year in its 117-year history and it currently has a forward grossed-up dividend yield of 4.1%.

It’s an investment conglomerate, so it can alter its holdings as it sees fit for long-term growth. This means the company’s value should be able to keep growing for decades to come and you won’t have to worry about selling.

Soul Patts has a high level of ownership from management as well as by diversified property business Brickworks Limited (ASX: BKW), meaning Soul Patts isn’t likely to take excessive risks.

Its total returns have outperformed the ASX over the long-term and I think that could continue.

Future Generation Investment Company Ltd (ASX: FGX) 

Future Generation is a listed investment company (LIC), as the name might suggest. It currently offers a grossed-up dividend yield of 6% and it has increased its dividend each year since it started paying in 2015.

The LIC is currently trading at a 10.5% discount to the underlying value of Future Generation at 31 December 2019. I think it’s nearly always attractive to buy shares of a business which is trading cheaply compared to the value of its quality assets.

What are Future Generation’s assets? It is invested in the funds of ASX-focused fund managers, but those 20-ish fund managers work for Future Generation for free so that it can donate 1% of its net assets each year to youth-related charities.

I think everyone is a winner from Future Generation.

Duxton Water Ltd (ASX: D2O) 

Duxton Water is a very interesting business. It purely owns water entitlements and leases them out to agricultural businesses.

Water values continue to rise because of the long-term lack of rainfall and the higher demand from high-value, water-hungry crops like almonds.

Duxton Water is entering into more long-term leases which secures income at attractive prices for the company, which has allowed the Board to forecast continued growing dividends over the next year.

The forward grossed-up dividend yield is now 5.6% because it’s trading at such a large discount to the underlying value of the water assets it owns.

Foolish takeaway

All four shares are good dividend ideas. Soul Patts could get a boost as early as this week if a court decision goes TPG Telecom Ltd’s (ASX: TPM) way, it’s also a great long-term pick. However, Service Stream could be quite opportunistic to buy whilst Future Generation is at a good discount to its net assets.

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Returns As of 6th October 2020

Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO, FUTURE GEN FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks, DUXTON FPO, and Service Stream 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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