I think 2020 is the most important year in quite a while when it comes to choosing ASX dividend shares. The coronavirus pandemic and associated economic damage it has brought with it has changed the dividend game on the ASX.
The companies offering substantial and sustainable dividend income look completely different in 2020 compared to last year or the year before. Think about it, the ASX banks like Westpac Banking Corp (ASX: WBC) are no longer income stalwarts. And 'safe' infrastructure shares like Sydney Airport Holdings Pty Ltd (ASX: SYD) are running dry when it comes to shareholder income.
So here are 2 ASX dividend shares that I would choose for income in 2020 instead.
Telstra Corporation Ltd (ASX: TLS)
Telstra is my first choice for dividend income in 2020. As the ASX's largest telco, I think Telstra benefits enormously from inelastic demand for its products and services (who wants to give up their internet connection these days?). That, in turn, gives Telstra the ability to pay a hefty dividend of 16 cents per share, which the company reaffirmed in its recent 2020 earnings report.
The Telstra share price has been sliding ever since this was released, however, as the market assumes the NBN rollout will damage its ability to pay this dividend again in 2021. However, I happen to think Telstra's dividend is sustainable since it's well-covered by free cash flow. Thus, I would be happy to snap Telstra shares up today for a trailing yield of 5.63% (or 8.04% grossed-up with full franking).
Coles Group Ltd (ASX: COL)
Coles is my second choice for a top dividend share for 2020. As a grocery business which sells food and household essentials, Coles also benefits from having an extremely inelastic earnings base (which was on full display in light of the panic buying we saw earlier in the year). As such, I think it deserves a presence in any dividend-focused portfolio.
I was very impressed with this supermarket giant's dividend announcement last month, in which the company bumped up its 2020 final dividend by 14.6% to 27.5 cents per share. That means Coles will pay 57.5 cents per share in dividends in 2020, which gives the Coles share price a trailing yield of 3.37% (or 4.81% grossed-up) on current pricing. That contrasts well with arch-rival Woolworths Group Ltd (ASX: WOW), which instead cut its 2020 final dividend. A 3.37% yield might not make the front page, but I think it's a good compromise in a year which has turned conventional ASX dividend wisdom on its head. Thus, I would also be happy to add Coles shares to any ASX dividend portfolio today.
