Finding quality ASX dividend shares in 2020 is a difficult task. And finding such shares offering a sustainable dividend yield above 8% is even harder. Dividend streams from former ASX dividend heavyweights like Ramsay Health Care Limited (ASX: RHC), Westpac Banking Corp (ASX: WBC), Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) have all but dried up in 2020. In my view, we will probably see more dividend deferrals, suspensions and cancellations over the remaining course of the year.
But don’t despair, income investors! I’ve found 2 ASX dividend shares currently offering trailing, grossed-up dividend yields above 8% today. What’s more, I think that these 2 shares will be able to sustain and grow their payouts going forward.
An iron-fuelled, ASX dividend giant
Fortescue Metals Group Limited (ASX: FMG) is my first ASX dividend share to consider today. Unlike most other ASX companies, Fortescue’s earnings in 2020 have been turbocharged by a pricing boom in its primary commodity of iron ore. According to its last annual report (2019), Fortescue’s average cost of extracting one tonne of iron ore was between US$12-13. Considering iron ore is today selling for around US$101 per tonne, there’s a lot of cash flowing into Fortescue’s coffers right now. Today, Fortescue shares are offering a trailing yield of 7.14%, or 10.2% grossed-up with franking. I also fully expect this yield to increase going forward if iron ore prices remain near their current levels.
An ASX energy stalwart
AGL Energy Limited (ASX: AGL) is my second ASX dividend share to consider today. AGL is the largest generator and supplier of electricity and gas in the country. Utility shares like AGL aren’t normally known for their growth prospects, but then that’s not why we’re here today!
AGL’s last interim dividend, which was paid in March this year, came in at 47 cents per share. Its last final dividend, paid in September 2019, was 64 cents per share. Putting these two together, we get a trailing dividend of $1.11 per share. That, in turn, gives us a yield on today’s share price of 6.63% or 8.9% grossed-up with AGL’s 80% franking. Electricity and gas are highly inelastic goods that don’t tend to see dips in demand during economically tough times. This leads me to conclude that AGL’s dividend payments should continue around their current levels in 2020 and beyond. The company has also been buying back its own shares in recent weeks, which I think is a further indication that AGL’s dividend will be safe in 2020.
Both AGL and Fortescue are strong companies that I think will continue to provide investors with robust dividends throughout 2020 and beyond. With the carnage that coronavirus has wreaked on the ASX dividend scene, I think having strong companies like these in one’s portfolio today would deliver massive benefits for an income investor.
Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Ramsay Health Care 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.