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3 top ASX dividend shares to buy for income

A money jar with label indicating ASXdividend shares
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This article is about three top ASX dividend shares that are known for their income payments to investors.

The official Reserve Bank of Australia (RBA) interest rate is now just 0.25%, meaning that many dividend yields are now materially higher.

Here are three ASX dividend shares that have kept increasing the dividend through COVID-19:

Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT) that owns a variety of farm types including cattle, almonds, macadamias, vineyards and cropping (sugar and cotton).

The business enters into long leases with high-quality tenants to ensure income certainty. It currently has a weighted average lease expiry (WALE) of more than 10 years.

Some of the ASX dividend share’s tenants include large players like Olam, JBS, Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE) and Australian Agricultural Company Ltd (ASX: AAC).

Rural Funds aims to increase its distribution by 4% each year for investors. This is achieved through a combination of contracted rental indexation and re-investing into productivity improvements at the farms.

Based on FY21 distribution guidance of 11.28 cents per unit, Rural Funds has a forward distribution yield of 4.5%.

Washington H Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts has the longest dividend growth streak on the ASX. It has grown the dividend every year since 2000.

Operating as an investment conglomerate, WHSP has a diversified portfolio of assets.

The ASX dividend share is invested across industries like telecommunications, building products, resources, listed investment companies (LICs), financial services, luxury retirement homes, agriculture and swimming schools.

In terms of actual names, its two biggest holdings are TPG Telecom Ltd (ASX: TPG) and Brickworks Limited (ASX: BKW).

Soul Patts receives annual investment income from its portfolio. It pays for its annual operating expenses and then pays out a good portion of the remaining net cashflow as the growing dividend.

At the current Soul Patts share price it has a grossed-up dividend yield of 3%.

APA Group (ASX: APA)

This ASX dividend share owns a large network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets and delivers half the nation’s natural gas usage.

The infrastructure giant has increased its distribution every year for a decade and a half. That’s one of the longest records on the ASX behind Soul Patts.

It recently announced an investment of up to $460 million to construct a new 580km pipeline in Western Australia to connect emerging gas fields in the Perth Basin to the resource rich Goldfields region, forming an interconnected WA gas grid. This is expected to be operational around the middle of 2022. Each time APA expands its pipeline in WA, it receives more requests for connection from miners wanting a reliable and affordable energy source, complementing variable renewable energy sources.

A couple of weeks after that, APA announced a two phased power expansion agreement with an existing customer, Gruyere Gold Mine in Western Australia, which will increase total installed capacity by 45%. The agreement includes the creation of the Gruyere Hybrid Energy Microgrid, APA’s first hybrid energy microgrid investment. Total capital expenditure for all expansion work will be approximately $38 million.

The ASX dividend share funds its distribution from the operating cashflow from its various assets. As more projects come online, APA generates more cashflow.

At the current APA share price, it has a distribution yield of 5.3%.

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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, Treasury Wine Estates Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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