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Wage growth is plummeting – here are 3 ASX dividend shares to start a second income

Wages are growing at their slowest rate in 22 years as coronavirus takes its toll on employee pay levels. Over the year to 30 June 2020, wages increased just 1.8%, the slowest pace since records began in 1997. The private sector saw a steeper decline in wage growth driven by large wage reductions across higher paid jobs. Economists say worse may be yet to come with downward pressure on wages growth to continue given the collapse in employment and depressed economic environment. If your next pay rise is looking less and less likely, take a look at these 3 ASX dividend shares which could give you a second income stream. 

3 ASX dividend shares for extra income

AGL Energy Limited (ASX: AGL)

This ASX dividend share’s revenues are underpinned by demand for energy, something that is unlikely to diminish. This was reflected in the company’s FY20 results, which showed stability during a period of significant upheaval. Underlying profit after tax was $816 million, in line with guidance of $780 – $860 million. AGL’s dividend policy targets a payout ratio of 75% of underlying profits after tax. A final dividend of 51 cents per share, 80% franked, was declared. Total dividends for FY20 were 98 cents per share. The Aussie energy giant is currently yielding over 7%, with the AGL share price trading 27% below its 2020 high. 

Harvey Norman Holdings Limited (ASX: HVN)

Harvey Norman has seen an increase in sales as a result of the pandemic as consumers spending more time at home redirect discretionary income from travel to the home environment. Despite store closures prompted by lockdowns, total sales for Australian franchisees were up 17.5% in the second half to early June. Having cancelled its interim dividend of 12 cents per share in April due to the uncertainty around the impacts of the pandemic, Harvey Norman subsequently declared a special dividend of 6 cents per share in June. The share price has risen recently in anticipation of higher sales over the full year, but the current Harvey Norman share price still provides a dividend yield of 5.15%. 

Fortescue Metals Group Limited (ASX: FMG) 

Fortescue is one of Australia’s largest iron ore producers, and has benefitted from recent strong demand for the metal. In the June quarter, the miner reported record shipments of 47.3 million tonnes of iron ore. This gave full year shipments of 178.2 million tonnes, exceeding the top end of guidance. This ASX dividend share targets a payout ratio of 50% to 80% of net profits and paid an interim dividend of 76 cents per share, up from 30 cents per share in 1H19. Although the Fortescue share price is near its high for the year, the company still offers a dividend yield of 5.56% at the time of writing.  

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 Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Kate O'Brien