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3 top ASX dividend shares to buy

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There are some top ASX dividend share ideas to thinking about as potential income options.

Here are three businesses to consider:

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

This business, which is also called Soul Patts, has grown its dividend every year since 2000, which is the longest dividend record on the ASX.

It has achieved this with a diversified investment portfolio with listed names like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI).

The investment conglomerate also has a number of unlisted investments and businesses including resources, agriculture, financial services and swimming schools.

Soul Patts likes to invest with a contrarian approach into resilient businesses which are largely uncorrelated to each other. This allows the company to continue to pay its growing dividend – it funds its dividend from the investment cashflow it receives in the form of dividends from those businesses like TPG.

The ASX dividend share continues to diversify its portfolio. In recent times it tried to buy Regis Healthcare Ltd (ASX: REG) and one of its most recent acquisitions was an agriculture portfolio.

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

Rural Funds Group (ASX: RFF)

This is a real estate investment trust (REIT) that owns agricultural properties. It owns a variety of different farm types including almonds, vineyards, cattle, macadamias and cropping (sugar and cotton).

It has plenty of large, listed tenants such as Treasury Wine Estates Ltd (ASX: TWE), Australian Agricultural Company Ltd (ASX: AAC), Select Harvests Limited (ASX: SHV), Olam and JBS. These tenants are signed on with long leases. Rural Funds currently had a weighted average lease expiry (WALE) of 10.9 years at 30 June 2020.

Rural Funds has structured rental growth with its contracts, with fixed and CPI-linked increases, as well as market rent review mechanisms.

The ASX dividend share has a development pipeline for both productivity improvements and conversion to higher and better use. This is expected to generate earnings growth in future years.

It’s the combination of contracted rental growth and investing that allows management to target an annual distribution increase of 4% per annum.

The FY21 annual distribution is expected to be 11.28 cents per unit, which would equate to a forward distribution yield of 4.6% at the current Rural Funds share price.

Charter Hall Long WALE REIT (ASX: CLW)

This is another REIT, it owns a diverse portfolio of different properties including long WALE retail, industrial and logistics, office, telco exchanges and agri logistics.

This ASX dividend share is liked by some investment brokers, including Citi.

Charter Hall Long WALE REIT has a number of major tenants that account for a high percentage of the rental income including Telstra Corporation Ltd (ASX: TLS), Australian government entities such as the NSW government, BP, Woolworths Group Ltd (ASX: WOW), Inghams Group Ltd (ASX: ING), Coles Group Ltd (ASX: COL), David Jones, Metcash Limited (ASX: MTS), Arnott’s Group, Westpac Banking Corp (ASX: WBC), Bunnings Warehouse, Suez, Linfox and Electrolux.

The WALE of this REIT is even longer than Rural Funds. At 31 December 2020, it had a WALE of 14.1 years, which was a slight increase from 14 years at 30 June 2020.

With an occupancy rate of 97.5% across 459 properties. All sectors except ‘office’ had an occupancy rate of 100%, with the office occupancy rate being 89.9%.

In the FY21 half-year it achieved operating earnings per share (EPS) and distribution growth of 3.6% to 14.5 cents. It also achieved net tangible asset (NTA) per security growth of 5.1% to $4.70.

At the current Charter Hall Long WALE REIT share price it has a FY21 distribution yield of at least 6% according to management.

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Returns As of 15th February 2021

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, Telstra Limited, Treasury Wine Estates Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. 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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