Motley Fool Australia

3 ASX dividend shares to buy for 2021

piggy bank wearing crown representing asx share dividend king
Image source: Getty Images

There are a number of ASX dividend shares that could be worth buying for income with 2021.

It’s pretty difficult for income investors to get enough income at the moment. Australia’s official interest rate has been cut to just 0.25%. That makes it hard to make decent money from your bank account.

I think ASX dividend shares are the answer for the income predicament. Businesses can generate good profits and pay out attractive dividends to shareholders. Some ASX shares have cut their dividends significantly, such as Westpac Banking Corp (ASX: WBC), there are better ideas out there.

Here are three great examples:

Brickworks Limited (ASX: BKW)

Brickworks is a diversified property business. It sells a variety of products in Australia like precast, roofing, bricks, paving and masonry. The construction industry could see a resurgence as Australia emerges from the impacts of COVID-19.

Some banks like Westpac are predicting that property prices could bounce over the next couple of years. I think that could be good news for demand for Brickworks products.

One of the great things about Brickworks is its dividend reliability. The ASX dividend share hasn’t cut its dividend for over 40 years. That’s a very impressive record in my opinion.

Brickworks has diversified assets including a large holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares as well as a 50% stake of an industrial property trust along with Goodman Group (ASX: GMG).

In 2021 the giant warehouses for Amazon and Coles Group Limited (ASX: COL) will be close to be completed. This would be a big boost for the value of the property trust.

At the current Brickworks share price it has a grossed-up dividend yield of 4.5%. It’s trading at under 11x FY21’s estimated earnings.

WAM Microcap Limited (ASX: WMI)

WAM Microcap is a listed investment company (LIC) which invests in businesses with market capitalisations under $300 million.

ASX shares can be great opportunities if you can fund those hidden gems that are about to go on to make big returns. WAM Microcap’s investment team have been very good at finding those opportunities.

The LIC can use the investment returns it makes to pay large ordinary and special dividends. WAM Microcap has paid a special dividend in each of the last three financial years.

Since inception in June 2017, WAM Microcap portfolio’s gross return before fees, expenses and taxes has been 21.7% per annum. That’s a very strong return. Over the past year, which includes COVID-19, the gross portfolio return has been 25.4%.

At the current WAM Microcap share price it has a grossed-up ordinary dividend yield of 5.7%. Including this FY20’s special dividend, at today’s WAM Microcap share price shareholders received a grossed-up dividend of 8.5% in FY20.

MFF Capital Investments Ltd (ASX: MFF)

MFF Capital is another LIC ASX share. It has been one of the best performers over the past decade (in total return terms) and I think the next decade could be very good under the stewardship of Chris Mackay.

It targets quality international shares which have strong competitive advantages. When you look at its current holdings, there is a clear bet on the payment giants Visa and Mastercard. Those two investments make up about a third of the portfolio. They have a long growth runway as more transactions turn cashless and there’s also the rise in e-commerce.

The MFF Capital board is looking to increase the six-monthly dividend payment to 5 cents per share in the medium-term. That translates to a grossed-up dividend yield of 5.5% at the current MFF Capital share price.

The ASX share has a lot of cash at the moment to protect against market volatility whilst it looks for new investment opportunities. At the current MFF Capital share price it’s trading at a 7% discount to the net tangible assets (NTA) per share at 18 September 2020.

Foolish takeaway

I think all three of these ASX dividend shares could be good options for income over the coming years. I believe Brickworks will continue to be very reliable, whilst WAM Microcap could continue its large dividend payments.

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 Tristan Harrison owns shares of Magellan Flagship Fund Ltd, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks 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.

Related Articles...

Latest posts by Tristan Harrison (see all)