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Should you invest in ASX shares for income?

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Should you invest in ASX shares for income?

The RBA interest rate is now so low it’s almost impossible to generate meaningful income from a savings account or term deposit.

If someone has a large sum of money in the bank – millions – then a bank account may generate enough interest. But otherwise you’re eating into your capital. Long gone are the days of earning over 5% in a completely safe way.

That’s one of the main things to remember about money in the bank compared getting income from ASX shares. Bank accounts are extremely low risk. If you don’t like the idea of your capital being exposed to volatility then the share market may not be appropriate for you.

However, if you invest wisely and can just view market volatility as a short-term feature rather than a long-term problem, then investing in ASX shares for income could be a good idea .

But it could be a good idea to still hold onto some of the cash and just invest what you need to get the required income level.

The coronavirus market decline could be a good time to invest and get higher long-term dividend yields.

Here are some of the ASX shares that could be considered for income

WAM Research Limited (ASX: WAX), the listed investment company (LIC), has a grossed-up dividend yield of 11.1%. It has increased its dividend every year since the GFC.

Brickworks Limited (ASX: BKW), the diversified property business, has a grossed-up dividend yield of 6.4%. It hasn’t cut its dividend for four decades.

Duxton Water Ltd (ASX: D2O), the water entitlement business, has a forward grossed-up dividend yield of 6.3%. It has projected dividend growth for the next two years.

Rural Funds Group (ASX: RFF), the farmland real estate investment trust, has a FY21 distribution yield of 6%. It aims to increase its distribution by 4% each year.

Out of the above four ASX share ideas for income I’d probably buy Brickworks and Duxton Water first for their discounts to the assets.

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Returns As of 6th October 2020

Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Brickworks and RURALFUNDS STAPLED. The Motley Fool Australia has recommended DUXTON FPO. 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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