2 ASX dividend shares I’d buy with $1,000

Brickworks and Wesfarmers are two of the leading ASX dividend shares I’d consider.

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Key points

  • Here are two ASX dividend shares that could be useful sources of income
  • Brickworks is a business that produces building products and owns industrial properties
  • Wesfarmers owns various businesses including Bunnings, Officeworks, Catch, and Australian Pharmaceutical Industries

Plenty of ASX dividend shares have seen share price declines in recent times. A lower share price can have the effect of boosting the potential dividend yield on offer from that business.

Of course, another potential benefit from a lower share price is being able to invest in the ASX share at better value as well.

With that in mind, here are two ASX dividend shares that I’d buy for income with $1,000:

Brickworks Limited (ASX: BKW)

Brickworks is a business with a significant presence in the property world.

The company produces a variety of different building products including bricks and pavers, masonry and stone, roofing, specialised building products, precast, cement, and timber battens. Austral Bricks, Austral Masonry, Bristle Roofing, and Austral Precast are some of the company’s brands.

The ASX dividend share boasts that its normal dividend has been maintained or increased every year since 1976. It has also grown its dividend every year for nine years in a row.

While part of the cash flow to fund its dividend comes from its investments division, Brickworks is particularly focused on the long-term growth of its industrial property trust in which it owns 50%, alongside Goodman Group (ASX: GMG).

Industrial properties are built on excess Brickworks land. Industrial real estate valuations are increasing in response to tailwinds such as online shopping. The demand for logistics properties is leading the trust to step up its building projects. As developments are completed, rental income keeps growing.

Brickworks explained the opportunity for property construction over the next few years:

There is a total of 221,100 square metres of lease pre-commitments already secured across the property trust. In addition, a further 176,400 square metres is available for development at the existing estates. Based on current demand, we expect these estates to be fully built out within three years. This will result in additional gross rent of around $60 million and leased asset value of $1.5 billion, taking total leased assets to around $4.5 billion.

I think the property trust can continue to add useful value for Brickworks, help grow its cash flow, and assist with dividend growth. At the current Brickworks share price, it has a grossed-up dividend yield of 4%.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is one of the largest S&P/ASX 200 Index (ASX: XJO) shares and it could also be one of the more compelling ASX dividend shares.

The company operates a number of leading retailers including Bunnings, Kmart, and Officeworks. It also has a presence in other areas such as a pure e-commerce business called Catch, various industrial businesses, and a segment called WesCEF which is for chemicals, energy, and fertilisers.

Wesfarmers has the flexibility to invest in different industries. It is currently working on the lithium project Mt Holland. The company also just completed the acquisition of Australian Pharmaceutical Industries which will be the start of a new health and beauty segment.

I think the diversification provides Wesfarmers with the ability to generate more consistent cash flow through economic cycles and, therefore, potentially pay a somewhat defensive dividend.

Wesfarmers balances its profit generation, balance sheet, potential acquisition opportunities, and rewarding shareholders when deciding on its dividend each year.

The trailing grossed-up dividend yield of Wesfarmers is 4.9%, after a 17% decline of the Wesfarmers share price in 2022 to date.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks. The Motley Fool Australia has positions in and has recommended Brickworks and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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