ASX dividend shares are back in the spotlight in 2022.
This comes in an environment of fast-rising prices, with interest rate hikes likely to follow. An environment that younger investors will have had no real life experience with.
As investors young and old have mulled the prospect of higher rates, growth shares, like many tech companies, have seen the brunt of the selling.
Witness the 21% decline in the S&P/ASX All Technology Index (ASX: XTX) so far in 2022, compared to the 2% loss posted by the All Ordinaries Index (ASX: XAO).
Many ASX dividend shares, on the other hand, have outperformed as investors seek income atop potential share price gains.
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Why investors are increasing their focus on dividends
Ben Lofthouse is the head of global equity income at Janus Henderson Australia.
On the topic of ASX dividend shares, Lofthouse said:
In many cases, dividend investing is focused on sustainability of cash flows. Companies that can afford to pay dividends often have good profitability and strong balance sheets, something that provides support through periods of uncertainty.
During past periods of rising inflation and rising interest rates, equity valuations have often begun to stagnate or even decline in terms of P/E (price-to-earnings) ratios. During these periods, dividends have formed an important part of returns as investors are 'paid to wait' for more supportive conditions for equities more broadly.
Noting that current conditions make forecasting quite difficult, Lofthouse added, "With valuations of income stocks still relatively low versus the market, we are seeing some indications of a rotation toward these value companies."
Two leading ASX dividend shares to consider
There are numerous ASX dividend shares to choose from. And many offer franking credits, enabling you to reduce your tax burden on the income they pay out.
Two leading ASX dividend shares worth investigating are BHP Group Ltd (ASX: BHP) and Macquarie Group Ltd (ASX: MQG).
Peter Gardner, co-founder of Plato Investment Management, lists both of these blue-chip stocks as his top two ASX dividend share picks. (Full details here.)
Gardner said that "Macquarie has continued to deliver consistent earnings growth and consistent dividends in recent years despite the challenges that have faced the financial services sector."
He also noted that its cash-heavy balance sheet "indicates it can sustainably grow dividends in the foreseeable future."
As for why BHP is one of his top ASX dividend share picks, Gardner said, "The big Australian is in a really good position to continue delivering big dividends for its Australian shareholders."
