Motley Fool Australia

3 ASX dividend shares to buy with yields over 7.5%

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

I think it’s a great time to start considering ASX dividend shares with big dividend yields.

It’s getting really hard to find income because of how low the official interest rate has gone. Plenty of good ASX dividend shares have seen their yields compressed as their share prices go higher.

Here are three ideas to really boost your income:

WAM Leaders Ltd (ASX: WLE)

WAM Leaders is a listed investment company (LIC) which is operated by the team at Wilson Asset Management (WAM). The lead portfolio manager is Matthew Haupt.

The idea of WAM Leaders is to provide an active approach to investing in the large caps on the ASX.

It owns some of the biggest businesses on the ASX in its portfolio like Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP), Goodman Group (ASX: GMG) and CSL Limited (ASX: CSL).

WAM Leaders also has a few ‘active’ picks outside of the ASX 20 in its top 20 holdings including Ramsay Health Care Limited (ASX: RHC), Challenger Ltd (ASX: CGF) and OZ Minerals Limited (ASX: OZL).

The performance of the WAM Leaders portfolio allows it to pay a steadily-growing dividend. It has a solid track record as an ASX dividend share. That’s very welcome in this era of COVID-19-caused dividend cuts.

Including dividend guidance for the upcoming FY21 half-year result, it offers a grossed-up dividend yield of 8.1%.

Pacific Current Group Ltd (ASX: PAC)

This is a boutique investment business that takes strategic stakes in global asset managers to help them grow. Pacific also brings its expertise to help managers grow, if they want help, so that the manager can focus on the investments.

I think that Pacific is one of the most promising, high-yield ASX dividend shares because of how fast its earnings may grow over the next few years. In FY20 it grew its underlying earnings per share (EPS) by 18% to $0.44. That allowed the board to increase the annual FY20 dividend to $0.35 per share. A dividend payout ratio of 80% is pretty high, but completely sustainable – particularly if the earnings keep going higher.

Excluding stakes sold and acquired during the year, funds under management (FUM) grew by 52% to $93.3 billion. Pacific thinks that asset gathering efforts could improve in FY21 with new commitments.

I think that the EPS and dividend can steadily grow over the next few years. At the current Pacific share price that makes the trailing grossed-up dividend yield of 8.1%.

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This is another LIC, but it looks at the opposite end of the market to WAM Leaders. This Naos ASX dividend share targets small caps with market capitalisations under $250 million, which is the smallest end of the market.

Some examples of the shares it owns includes BTC Health Ltd (ASX: BTC), Experience Co Ltd (ASX: EXP) and Saunders International Ltd (ASX: SND).

Naos like to be long-term investors in businesses that the investment team has high-conviction in. That’s why Naos generally only has around 10 names in the portfolio.

This ASX dividend share has maintained or grown its dividend every year since the second half of FY13. That means it has a pretty reliable record compared to many other dividend stocks on the ASX.

At the current Naos Emerging Opportunities Company share price it currently offers a grossed-up dividend yield of 10.1%.

Foolish takeaway

Each of these ASX dividend shares offer really good starting yields. At the current prices I think I’d definitely go for Pacific because of its global growth potential and its expected continuing growth in FY21.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia's Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a 'must consider' for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don't miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Returns As of 6th October 2020

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Macquarie Group Limited. The Motley Fool Australia owns shares of EXPERNCECO FPO. The Motley Fool Australia has recommended Ramsay Health Care 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)