What I find interesting about these two events is that one gives less incentive to leave cash in the bank, with Aussies earning almost nothing on interest payments, while the other boosts the dividend yields of companies. This is because many ASX shares have followed the broader market and been sold off.
These two events amplify the appeal of ASX dividend shares in my mind. Of course, this dividend yield is only as good as the company’s revenue that funds it. So, finding a company which shouldn’t have its earnings materially affected, that can weather the ensuing storm and is able to return to normal on the other side is important.
With that in mind, below are two ASX dividend shares I would consider buying next week.
Dicker Data Ltd (ASX: DDR)
Dicker Data is a wholesaler of computer/IT hardware, software and cloud-based solutions both here in Australia and in New Zealand.
In Dicker Data’s most recent report, the company revealed Australian revenue growth of 16.8% and New Zealand growth of 38.4% for FY19. Dicker Data has consistently managed to reduce operating costs as a percentage of revenue over the past 5 years. This has accelerated profit growth and translated into net profit after tax (NPAT) for the period increasing by 67.3%, to $54.3 million.
Dicker Data has made no mention of the coronavirus in its announcements. And in fact, there has been a number of directors buying shares recently. Co-founder David Dicker and four other directors have taken advantage of the recent share price weakness to top up their holdings. Dicker Data currently offers a trailing grossed-up dividend yield of 5.84%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
“Soul Patts” is an Aussie investment conglomerate and the second-oldest listed company on the ASX today. It’s also a go-to ASX dividend share, paying out a dividend to shareholders every year of its history which stretches back over 100 years. I can’t see that changing anytime soon, even during the current market crash.
From what started out as a pharmaceutical business, Soul Patts now pays out its dividends from income received from many of its investments. These investments include large stakes in other ASX-listed companies such as TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and New Hope Corporation Limited (ASX: NHC).
Soul Patts also has a strong balance sheet with plenty of cash on it. This places it in a position to capitalise on any investment opportunities arising from the current market turmoil. In addition to this, cash can help the company weather any difficult times ahead and allows it to continue paying out its dividend.
Soul Patts hasn’t seen its share price fall as far as the greater market, likely as investors look for a stable income shares during the market uncertainty. However, Soul Patts still offers investors a trailing grossed-up dividend yield of 4.39%.
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Motley Fool contributor Michael Tonon owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks. 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.