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3 star ASX income shares for 2021

man sitting in hammock on beach representing asx shares to buy for retirement
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I believe there are some good star ASX income shares that could be worth holding in a dividend portfolio.

Cash in the bank is hardly earning anything any more because of how low Australia’s official interest rate is.

But there are plenty of ASX income shares that offer good starting yields with the potential for longer-term growth.

Here are some businesses which look good value and could deliver good total returns in 2021:

Brickworks Limited (ASX: BKW)

Brickworks released its FY20 result today. For ASX income share investors, the key statistic was that the total FY20 dividend was grown by 4% to 59 cents per share, after a 3% increase to the final dividend to 39 cents per share.

At the current Brickworks share price that means it offers a grossed-up dividend yield of 4.5%. Brickworks hasn’t cut its dividend for 44 years. That’s a really strong record.

What was pleasing about the FY20 result was that Brickworks said that orders and sales have increased in September across most of its Australian building products businesses. That suggests that Brickworks could do well in FY21.

I also liked that Brickworks’ share of net assets of its property trust (which it owns 50% of) increased by $94 million and the net trust income rose by 15% to $30 million.

Amazon and Coles Group Limited (ASX: COL) will soon be major tenants at two large warehouses being built by the property trust.

I also believe that Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) will continue to be a good long-term investment for Brickworks.

Future Generation Investment Company Ltd (ASX: FGX)

Future Generation is a listed investment company (LIC) which was set up as a really good philanthropic company.

It donates 1% of its net assets each year to youth charities. I think that’s a really good initiative, the future of Australia will be decided by the younger Australians of today. Some of them may need help, particularly with what’s going on with COVID-19.

But it’s not just set up as a charity. As a LIC, it aims to make investment returns for investors. The job of a LIC is to invest in other assets on behalf of shareholders.

The ASX income share is invested in the funds of around 20 different Australian fund managers that invest in ASX shares. Some of the managers involved are: Bennelong, Paradice, Regal, Eley Griffiths and Wilson Asset Management.

Those investment managers work for free – no management fees and no performance fees. They work for free so that Future Generation can make its annual donation.

Investment returns made by a LIC can be turned into steady dividends for shareholders. Future Generation has grown its dividend each year for the past five years. Its gross portfolio return has also outperformed the S&P/ASX All Ordinaries Accumulation Index by 2.6% per annum since inception in September 2014.

At the current Future Generation share price it offers a grossed-up dividend yield of 6.6%.

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is an agricultural real estate investment trust (REIT) that has gone through a tough time over the past year or two due to the drought and a few specific issues at some of its farms.

The farm landlord benefits from the success of the farms that it leases to Costa Group Holdings Ltd (ASX: CGC) with an 25% annual profit share from those farms.

I think those farm-specific issues could be resolved by 2021, which would be a boost for variable rent and overall profitability in 2021.

The ASX income share’s distribution could rise in 2021 with a return to normal conditions. The new manager is also looking for food-related property investments that could provide more consistent rental income.

I think it could be one of the best-performing REITs over the next 15 months. At the current share price it’s trading at a 14.3% discount to the net asset value (NAV) at 30 June 2020.

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 FUTURE GEN FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, COSTA GRP FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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