I think we're very lucky to have a wide array of choice for ASX dividend shares that can help us make passive income in retirement.
For me, if I were in retirement, I'd be thinking about how reliant I am on that passive income cash flow. It's no use if the dividends disappear precisely when I need them.
I'm not in retirement now. But, I am building a portfolio of ASX dividend shares that seem like they can maintain and grow their dividends over the long term.
Three of the below businesses are in my portfolio. Hopefully, one day my portfolio can generate $50,000 of annual dividends, or more.
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Rural Funds Group (ASX: RFF)
Rural Funds is a real estate investment trust (REIT) that owns a diversified agricultural property portfolio across areas such as cattle, almonds, vineyards, macadamias, and cropping (sugar and cotton).
This business aims to grow its distribution by 4% each year, which I think is a solid growth rate and can compound nicely over time.
Rural Funds benefits from growing rental income. Some of the rent is linked to inflation (which is getting a boost), while most of the rest has a fixed annual increase. Plus, there are occasional market reviews.
The ASX dividend share is also able to grow rent by investing in its farms, either by making them more productive or changing them to another farm type, generating more rental profit.
It's expected to pay a total distribution of 12.2 cents in FY23, translating into a forward yield of 4.9%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
This is an investment company that has been operating for decades. It's invested in sectors such as building products, telecommunications, property, financial services, agriculture, resources, and so on.
With its focus on defensive, uncorrelated assets, the ASX dividend share receives good (and growing) cash flow from its investment portfolio and then uses the majority of that cash flow to pay a growing dividend.
It has grown its dividend every year since 2000. This is the longest-running dividend growth record on the ASX.
Using the ordinary annual dividend of 72 cents per share from FY22, it has a grossed-up dividend yield of 3.6%.
Metcash Limited (ASX: MTS)
This business has three pillars.
The food pillar is about being the supplier to independent supermarkets, predominantly IGAs.
Metcash also has a liquor business, where it supplies independent liquor retailers such as Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, Big Bargain Bottleshop, and Duncans.
Finally, the third pillar is hardware. It owns the brands Mitre 10, Total Tools, and Home Timber & Hardware.
I like the defensive parts of the business – food and liquor – which can offer resilient earnings. Additionally, I think the hardware business offers the most potential to deliver higher margins and earnings growth.
Metcash aims to pay out 70% of its underlying net profit as a dividend. In FY22, it paid an annual dividend of 21.5 cents per share, which translates into a grossed-up dividend yield of 7.8%.
Brickworks Limited (ASX: BKW)
Brickworks is another ASX dividend share with an impressive record. It hasn't cut its dividend for more than four decades.
It is one of the largest building product manufacturers in Australia, with a leading position in bricks, and it also has other divisions such as roofing. Brickworks has also managed to achieve a market-leading position in the northeast of the US through acquisitions.
Brickworks also owns a sizeable chunk of Soul Pattinson, so it's benefiting from the diversification and growing dividends from the investment company.
Finally, it has investments in property, including a growing industrial property trust that it owns half of, along with Goodman Group (ASX: GMG). The property trust is building quality industrial properties on excess Brickworks land. This can help grow rental profit and help fund higher dividends.
The current Brickworks grossed-up dividend yield is 4.3%.
