It has been a decade since the ASX has been this volatile. One day the market is showing a huge drop and then it recovers some of that back.
We probably haven't seen the last of the falls yet, but the share market only has so far to fall. Even during the GFC the share market only fell around 50% over the course of a year, there was only a very brief period when it was down by more than half.
I think investors may have a more measured response if you just focus on the dividends offered by shares. If you weren't planning on selling your shares in the short-term then it shouldn't really matter what share prices do in the short-term. The only cash you'd receive from your shares is the dividend.
Here are three great ASX shares that could help you ride out the volatility if you focus on the dividends:
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts may be the best dividend share on the ASX. Why? Because of two key reasons.
The first reason is because it's an investment conglomerate. That means it's invested in an array of businesses in different industries such as telecommunications, resources, building products, property, pharmacies and so on. This diversified nature means that Soul Patts' cashflow should be pretty resilient, particularly because it's invested in a number of defensive businesses.
The second reason is that its dividend has been increased every year since 2000, which is one of the best records on the ASX. It grew through the GFC. In this case, I think past performance is a pretty good indicator of future dividend reliability because it's something the Board can control. It's able to keep growing the dividend not only due to its investments' growth, but Soul Patts also generally retains around 10% or more of its net regular cashflow (investment income less expenses) to re-invest into more opportunities, or at least retain to pay future dividends.
It currently has a grossed-up dividend yield of 4.3%.
Brickworks Limited (ASX: BKW)
Brickworks has one of the best dividend records on the ASX. It has maintained or grown its dividend every year for over 40 years. That's one of the most reliable records in the world, not just Australia.
The company is able to provide such a safe source of dividends because it has a diverse set of divisions. It has an excellent building products division with market leading categories in Australia as well as a new division in the US after some good acquisitions.
It also owns half of a very promising industrial property trust. This is providing good net rental profit, with growing rental income and attractive growth prospects as more projects are completed.
It also owns a large amount of Soul Patts shares, which gives it a stable and growing source of earnings and dividends.
Brickworks currently has a grossed-up dividend yield of 4.9%.
Rural Funds Group (ASX: RFF)
There aren't many shares that are as rock-solid as Rural Funds. As a farmland real estate investment trust (REIT) it doesn't have much hope of generating huge returns in any given year, but it's a business that can deliver attractive compounding returns year after year.
Rural Funds Management aim to increase the distribution by 4% each year thanks to a combination of contracted rental indexation, productivity investments at its farms and potential acquisitions. The productivity investment strategy is working particularly well for its cattle farms which is leading to an attractive increase in rental income and rise in the value of the farm.
It has a long weighted average lease expiry (WALE) of over 11 years, a 100% portfolio occupancy rate and a relatively low gearing level.
Rural Funds has already guided that the distribution for FY21 will be 11.28 cents, which translates to a current yield of 5.9%.
Foolish takeaway
All three of these businesses have good dividend yields, which aren't too high, and good prospects for further income growth over the coming years. I'm particularly attracted to Soul Patts today because of the diversified nature of its assets and the long-term focus.
