ASX dividend shares can be an effective way to generate income. But there are some businesses that may have the potential to continue to increase the dividend in the future.
Companies that were previously demonstrating a record of consistent or growing dividends faced difficulties when COVID-19 came along.
However, there is a small group of businesses that have the potential to continue to grow their dividends (as they have been doing):
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is the ASX dividend share with the longest record when it comes to dividend increases. The business has grown its dividend every year since 2000. There are very few companies that have grown their dividend for more than 10 years in a row on the ASX.
The Soul Patts portfolio is an important part of how it has continued with that dividend growth record.
It owns a number of different investments where it has a material amount of money invested including: TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Australian Pharmaceutical Industries Ltd (ASX: API), Clover Corporation Limited (ASX: CLV), Tuas Ltd (ASX: TUA), Pengana Capital Group Ltd (ASX: PCG) and Pengana International Equities Ltd (ASX: PIA).
There are also non-ASX investments in the portfolio such as agriculture, resources, swimming schools and retirement living which provide diversification and more investment opportunities.
This investment portfolio provides the ASX dividend share with investment income. After paying for expenses, Soul Patts is able to re-invest the remaining operating cashflow into other opportunities. Private equity and international shares are two areas that Soul Patts has identified as potential places it's looking.
At the current Soul Patts share price, it has a grossed-up dividend yield of 2.3%.
Charter Hall Long WALE REIT (ASX: CLW)
This ASX dividend share is a real estate investment trust (REIT). It owns a diversified portfolio of different properties which are all on long-term leases.
In terms of the different sectors, it is spread as follows: 33% in long weighted average lease expiry (WALE) retail, 22% in industrial and logistics, 25% in office, 15% in social infrastructure and 5% in agri-logistics.
Some of the tenants that are currently using Charter Hall Long WALE REIT's properties includes names like the Australian Government, Telstra Corporation Ltd (ASX: TLS), BP and Endeavour Group Ltd (ASX: EDV).
Prior to a recent potential acquisition, the ASX dividend share had an occupancy rate of 98.3% with a WALE of 13.2 years. The REIT says that income growth is driven by annual rent increases in all leases. In the FY21 result it said that it has inflation protection with 40% of leases linked to CPI inflation and 60% of leases fixed with an average fixed increase of 3.1%.
It's currently looking to take over ALE Property Group (ASX: LEP) alongside a consortium. This deal would lead to its number of properties rising to 550, whilst the property value went up to $6.5 billion.
In FY22, it's expecting its operating earnings per share (EPS) to grow by at least 4.5% compared to FY21. It pays a distribution payout ratio of 100% of operating earnings.
It's currently rated as a buy by the broker Citi, with a price target of $5.59. Citi is expecting the REIT to pay a distribution of 31.10 cents per share in FY22, which equates to a distribution yield of 6.3%.
