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3 ASX dividend shares raising their dividends like clockwork

ASX dividend shares could be the only way to make good income from your money at the moment.

I’m not talking about some blue chip shares like Westpac Banking Corp (ASX: WBC) or Transurban Group (ASX: TCL). Income investors haven’t been able to bank on reliable dividend payments from them in 2020.

I’m talking about ASX dividend shares with reliable business models that continue to increase their income payments to shareholders even through COVID-19.

A business that can increase its dividend during this period is definitely worth considering for an income portfolio:

Dividend share 1: APA Group (ASX: APA)

APA is my preferred infrastructure ASX dividend share. It doesn’t require a certain number of air passengers or cars to generate its earnings.

APA owns a large network of pipelines across Australia, it’s about 15,000 km in size. It actually delivers around half of Australia’s natural gas.

The energy asset giant also owns (or has interests in) gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar).

APA has grown its distribution every year for a decade and a half. It funds that distribution from its annual cashflow, which is regularly growing. As more projects and investments are completed, that cashflow increases and this will fund higher distributions over time.

Based on the FY20 distribution, at the current APA share price, it offers a distribution yield of 4.5%. Not a bad starting yield for an ASX dividend share.

Dividend share 2: Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT). It owns a variety of farm types including almonds, macadamias, cattle, cotton and vineyards.

As a farmer there are commodity risks, just like there are with miners. However, as a landlord Rural Funds isn’t exposed to those sorts of risks. It’s the tenant that takes on the operational risks.

The farms are spread across states and climactic conditions, so Rural Funds is well diversified. It recently announced an $81.1 million sugar cane farm acquisition which it plans to progressively turn into macadamia orchards and the rest will be able to be used for cropping.

The ASX dividend share aims to increase its distribution by 4% per annum, which it has been successful at doing since it first listed and started paying a distribution several years ago.

We all need to keep eating food, so Rural Funds’ rental income should keep flowing from its quality tenants like JBS and Olam. That rental income is steadily growing thanks to contracted rental indexation of either a fixed 2.5% increase or it’s linked to CPI inflation, plus market reviews.

Rural Funds has provided guidance of a FY21 distribution of 11.28 cents per share, which equates to a 5.4% yield at the current Rural Funds share price.  

Dividend share 3: WAM Microcap Limited (ASX: WMI)

WAM Microcap could be one of the best ASX dividend shares on the ASX in my opinion. It’s a listed investment company (LIC) run by Wilson Asset Management which invests in small cap ASX shares. Generally, those targets have market caps under $300 million.

ASX small caps have the potential to make the biggest returns for investors because they’re not followed by many investors, so they’re priced lower. Those small businesses also have a lot of growth potential. It’s much easier growing a company’s market cap from $200 million to $400 million than it is to go from $20 billion to $40 billion.

WAM Microcap can turn the investment returns it generates into a big, growing dividend for its shareholders. The WAM Microcap board have an aim of growing the dividend, assuming it makes sense to do so and it has sufficient profit reserves and franking credits.

Since inception in June 2017, the WAM Microcap portfolio has returned 15.9% per annum before fees, expenses and taxes. That’s a very strong performance and allows it to fund a solid dividend.

The ASX dividend share recently announced a bigger ordinary dividend, a special dividend and a capital raising. I am very likely to participate in that capital raising, even if I just do a fairly small purchase.

At the current WAM Microcap share price, using the FY20 annual ordinary dividend of 6 cents per share, it has an ordinary grossed-up dividend yield of 5.9%.

Foolish takeaway

I really like each of these ASX dividend shares. Right now I think WAM Microcap could be the best pick. It has the highest yield and may it generate the strongest total returns over the long-term. But I think both APA and Rural Funds are likely to deliver very reliable cashflow over the next 12 months and beyond. 

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and WAM MICRO FPO. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of APA Group and Transurban Group. 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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