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Investors wanting safe income should own these 3 ASX shares

Are you an investor that wants safe income? I think there are some ASX dividend shares that can provide reliable income.

Nothing in the share market is guaranteed – it’s not like a term deposit. Share prices can be very volatile. The share market is made up of different buyers and sellers every day. It’s not surprising that share prices move around so much.

Dividend income from ASX shares is a bit different. The boards of companies have a lot of control over what dividend they declare each year. Dividends are much more likely to follow the longer-term direction of the business’ profit.

With that in mind, here are three ASX shares that could offer safe income:

Share 1: APA Group (ASX: APA)

APA is an infrastructure giant which owns a large amount of gas pipelines around Australia. It supplies around half of the country’s natural gas. APA also owns, or has stakes in, a number of energy generation or energy storage assets.

Gas demand has held up well for APA during this difficult period. Resilient demand has meant robust for APA’s cashflow. The business funds its distribution from the annual cashflow, so it was able to pay the expected FY20 annual distribution of 50 cents per unit.

At the current APA share price, that distribution amounts to a yield of 4.35%. I think that APA is a reliable ASX share for dividend income because it already has a solid track record. It has increased its distribution every year for the past decade and a half. It can keep growing as the annual cashflow keeps growing with more projects or investments coming online.

Share 2: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

I think that Soul Patts is the gold standard for reliable dividend income.

The ASX share has grown its dividend every year since 2000. It has also paid a dividend every year since it listed in 1903. The dividend has kept coming through wars and recessions.

Soul Patts is an investment house with a diversified portfolio of assets like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW) and Clover Corporation Limited (ASX: CLV). It also operates unlisted businesses like swimming schools, resources and agriculture.

Each year the company receives investment income from its assets, Soul Patts pays its expenses from this income and then pays out the dividend with a substantial portion of the rest. In FY19 it retained around 20% of the net regular operating cashflow, allowing it to re-invest that money into other opportunities.

Soul Patts’ dividend can keep growing from this re-investing as well as growth from its existing holdings.

At the current Soul Patts share price it offers a grossed-up dividend yield of 4.2%.

Share 3: Rural Funds Group (ASX: RFF)

There are few ASX shares with the income potential of Rural Funds in my opinion. I think it offers a good combination of a solid starting yield as well as ongoing growth.

At the current Rural Funds share price it has a FY21 distribution yield of 5.3%. The farmland real estate investment trust (REIT) is aiming for distribution growth of 4% per annum.

REITs are known for having good yields, and Rural Funds has a smart investment strategy. It owns farms with long-term income growth potential such as cattle and almonds.

Its contracted rental income grows by either a fixed 2.5% increase per annum or it’s linked to CPI inflation, plus market reviews.

The REIT also is growing its rental income by investing in productivity improvements at farms. At the moment it’s focusing on investing at its cattle farms.

Foolish takeaway

Each of these ASX shares have grown their dividends to shareholders for multiple years in a row. I think that record could continue in FY21 and perhaps for the rest of the decade. Soul Patts is my favourite ASX share idea for reliable dividend income because it’s diversified and it can shift its portfolio over time.

Where to invest $1,000 right now

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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.

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Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA 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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