I think ASX dividend shares are the best way to beat income problems from low interest rates.
The official RBA interest rate is now just 0.25%. That’s not going to do anyone any good if they have a large amount of cash in the bank.
Businesses can generate reliable profit and pay out some (or all) of it as a dividend. There are plenty of ASX dividend shares that I think can provide solid income over the coming years:
Brickworks Limited (ASX: BKW)
Brickworks is a diversified property business. It has several attractive divisions.
The main division that investors would know is Brickworks’ Australian building products segment. It produces and sells things like bricks, paving, masonry, precast and roofing. This segment may be troubled in the short-term because of the current economic conditions, but I think it has good long-term growth potential as Australia’s cities continually grow and rejuvenate.
Brickworks also recently expanded into the US with three acquisitions. That turned Brickworks into the market leader in the north east of the United States. The US is a huge market and Brickworks is aiming to improve efficiencies there, which should raise profitability.
The ASX dividend share has two divisions which provide reliable cashflow and entirely fund Brickworks’ dividend.
Brickworks has a 50% stake in industrial property trust. Industrial properties are seeing higher demand with the rise of ecommerce. Brickworks recently announced that Amazon will be taking up a long-term lease of a huge automated warehouse which is to be built in Sydney.
The company also owns a substantial amount of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, the diversified investment conglomerate. Soul Patts itself provides Brickworks with growing dividends each year.
Brickworks hasn’t cut its dividend in over 40 years. At the current Brickworks share price it offers a grossed-up dividend yield of 5%.
Rural Funds Group (ASX: RFF)
I think Rural Funds is one of the best ASX dividend shares around.
Rural Funds is a farmland real estate investment trust (REIT). It owns a portfolio of different types of farms including almonds, macadamias, cattle, cotton and vineyards. Some of its tenants include Olam, JBS and Select Harvests Limited (ASX: SHV).
The REIT has built-in rental indexation with the contracts having a fixed 2.5% annual rental increase or being linked to inflation, plus market reviews. This is a major part of the ASX dividend shares to have a goal to increase its distribution by 4% every year.
It also re-invests some of its rental profit into investing at the farms each year. It usually keeps around a fifth of its cash rental profit each year. The productivity investments should increase the value of the farm and unlock more rental income over time.
At the current Rural Funds share price it offers an FY21 dividend yield of 5.3%.
WAM Leaders Ltd (ASX: WLE)
WAM Leaders is a listed investment company (LIC). The job of a LIC is to invest in other shares on behalf of shareholders. This particular LIC is operated by Wilson Asset Management (WAM) and targets ASX blue chips.
The ASX dividend share performed very well during FY20. The WAM Leaders investment portfolio outperformed the S&P/ASX 200 Accumulation Index by 10.4% with a gross return of 2.7%.
WAM Leaders can turn its long-term investment returns into a smoothed dividend for shareholders. That’s exactly what it has been doing since it started paying a dividend in FY17. It has increased its dividend every year since FY17.
In FY20 in increased its dividend by 15% to 6.25 cents per share. Using the FY20 dividend payment, at the current WAM Leaders share price it offers a grossed-up dividend yield of 7.7%.
At 30 June 2020 it had pre-tax net tangible assets (NTA) per share of $1.18. So it’s currently trading at a slight discount to that value. I think buying outperformance at a discount is an attractive option for a good ASX dividend share.
I think each of these ASX dividend shares looks like they could be an attractive long-term buy today. At the current prices I think I’d go for Brickworks for its ultra-long-term stable dividend record and defensive assets.
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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company 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.