I think September is a great time to buy ASX dividend shares.
We've just seen most of the results in the August 2020 reporting season. So we now have good idea about how businesses performed through the tough COVID-19 period.
Businesses that can grow (or maintain) the dividend during these times are truly great ASX dividend shares. But they also need to be at a good price to buy them today.
That's why I'm personally interested in these two ASX dividend shares in September:
Future Generation Investment Company Ltd (ASX: FGX)
Future Generation is a listed investment company (LIC). I think it's a special LIC because it doesn't have any management fee costs and instead it donates 1% of its net assets to youth charities each year.
What does it invest in? Future Generation invests into the funds of other fund managers which buy ASX shares. Those fund managers work for free to enable the donations to be paid.
The useful thing about LICs is that they can generate investment returns and then pay out those profits as a steady (and growing) dividend.
Looking at Future Generation's gross portfolio performance over the past five years, it has outperformed the S&P/ASX All Ordinaries Accumulation Index by 2% per annum.
It has increased its dividend every year since 2015 when it first started paying a dividend. It hasn't been fast growth, but the steady income growth has been attractive.
At the current Future Generation share price the ASX dividend share has a grossed-up yield of 6.9%. Aside from the nice yield, I also like Future Generation because it's trading at a 8.3% discount to the net tangible assets (NTA) at July 2020. Buying a LIC at a discount with long-term outperformance is attractive to me.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
I think that Soul Patts is the gold standard for dividends on the ASX. I believe that every Aussie income investor should have Soul Patts in their portfolio.
It's the only business on the ASX to have increased its dividend every year over the past two decades.
How has it managed that? Well, it's an investment conglomerate with a diverse portfolio with largely defensive businesses. Its holdings like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW) and New Hope Corporation Limited (ASX: NHC) send dividends to Soul Patts which it can then pay to shareholders, whilst retaining a portion for investing in new opportunities.
The ASX dividend share's annual cashflow benefits compounding from both the retained net cashflow it invests into new businesses as well as its existing holdings growing their dividends.
Soul Patts has paid a dividend every single year since it listed in 1903. That means dividends have continued to flow to shareholders through world wars, the Spanish Flu, the 1930s depression and so on.
I like that Soul Patts tries to identify investment opportunities that can keep growing profit whether times are good or bad. For example, I think swimming schools – one of Soul Patts' private investments – would be a reliable business even during a non-pandemic recession because parents would still want their children to learn how to swim.
Over time, I think Soul Patts can grow its dividend for many years into the future because it makes long-term investments itself. The ASX dividend share can steadily shift its portfolio to new opportunities as they arise. It will seemingly soon be invested in regional data centres, which is a great long-term growth area.
At the current Soul Patts share price it offers a grossed-up dividend yield of 4.15%.
Foolish takeaway
I really like both of these ASX dividend shares, that's why I own them in my portfolio. They offer solid starting dividends yields, they have a history of dividend growth and have good portfolio diversification. Future Generation is probably better for people who want a higher starting yield, but I'd rather buy Soul Patts for its long-term growth record and steady capital growth.
