ASX dividend shares could be the right place to search for options that may be able to deliver reliable income growth.
Just because a business pays a dividend doesn’t mean that it’s targeting growth of the dividend over time.
But there are a few businesses out there that have grown the dividend for a number of years in a row:
Charter Hall Long WALE REIT (ASX: CLW)
This is a real estate investment trust (REIT) that owns a diversified property portfolio. A key focus of the business is to find quality tenants and lease those buildings on long-term leases.
At the end of FY21, its portfolio had a weighted average lease expiry (WALE) of 13.2 years, which the business says provides long-term income security. At the time, around half of the leases were triple net leases, where tenants are responsible for all outgoings, maintenance and capital expenditure.
Over the year, its net tangible assets (NTA) increased 16.8% to $5.22, whilst the distributions increased 3.2% to 29.2 cents per unit. At the time of the FY21 report release, it said it was expecting the FY22 operating earnings per security (EPS) to rise by at least 4.5%.
The ASX dividend share recently announced that it was part of a consortium looking to buy ALE Property Group (ASX: LEP). The properties have an annual rental escalation linked to CPI. After the transaction, it would bring the WALE to 12.6 years.
It also announced it had acquired two industrial properties in Sydney and Brisbane with WALEs of 16.8 years and 7.9 years respectively, for a total cost of $67 million.
Charter Hall Long WALE REIT is still expecting to grow its operating EPS by at least 4.5% in FY22. The ASX dividend share usually pays out 100% of its operating earnings. That suggests a distribution yield of at least 6% in FY22.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts holds the record for the longest streak of consecutive years of dividend increases. The investment conglomerate has grown its dividend every year since 2000.
It has managed to achieve this by holding a portfolio of defensive and largely uncorrelated businesses and assets.
Soul Patts has a portfolio of unlisted businesses and listed ASX shares. Most of them pay dividend and distribution income to Soul Patts each year, providing cashflow for the ASX dividend share to pay a growing dividend and re-invest the rest.
Some names in the portfolio includes TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Bki Investment Co Ltd (ASX: BKI), Pengana Capital Group Ltd (ASX: PCG) and Pengana International Equities Ltd (ASX: PIA).
Unlisted holdings include agriculture, swimming schools, resources (Round Oak) and financial services.
The ASX dividend share is regularly looking to add to its portfolio. For example, it’s going through the process of acquiring Milton Corporation Limited (ASX: MLT) which will allow it to invest materially into other assets including international shares.
Soul Patts recently announced that it’s expecting to report regular profit growth from Round Oak, Brickworks and New Hope.
At the current Soul Patts share price it has a grossed-up dividend yield of 2.4%.