ASX dividend shares can be a really good way for investors to grow wealth and also receive passive income.
Some businesses may be largely known for their dividends, such as Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Rio Tinto Limited (ASX: RIO).
But, some of these large blue chip ASX shares may be about as large as they're going to become. I think businesses that can deliver both income and earnings growth (which can help share price growth) could be the ticket for long-term financial success.
How much $100 a week can grow into
Investors should try to minimise their brokerage costs where possible, so it doesn't make sense to make lots of small investments.
However, it's possible to save the $100 each week in a savings account until the amount grows to a satisfactory level to invest.
In total, that would amount to $5,200 a year.
It's hard to say what future returns will be – past performance is not a reliable indicator of future performance. Over the decades, the ASX share market has returned approximately 10% per annum, excluding franking credits.
Investing $5,200 a year, returning 10% per annum, could turn into $83,000 in 10 years, and $298,000 in 20 years. And in 30 years that $100 a week could turn into $855,000. Remember, those numbers assume the $100 per week number stays the same, with no increase. It would grow even more if the investment is $120 per week or $200 per week.
Which ASX dividend shares could deliver good returns?
I think that businesses that have already done well have a good chance of continuing that success.
Businesses that have diversification of earnings – through different product/service offerings or being geographically diversified – give themselves a better chance of performing well in the long term. That's because they aren't reliant on just one market for one product.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is one business that ticks the box in my opinion. It has an array of impressive retail businesses like Bunnings, Officeworks and Kmart. But, the ASX dividend share also has a growing portfolio of other businesses. These include chemicals, energy and fertilisers (WesCEF), healthcare (Priceline and Clear Skincare Clinics) and lithium (Mt Holland project).
I think Wesfarmers will be around for decades to come, generating good profit. Its business portfolio may be quite different, but I like that it can alter its businesses to be more future-focused.
In FY24 the ASX dividend share is expected to pay a grossed-up dividend yield of 5.8% according to CommSec.
Pinnacle Investment Management Group Ltd (ASX: PNI)
Pinnacle Investment Group is a funds management investment business. It helps fund managers start and grow their own funds management businesses. It can help with seed capital and also do a lot of the back-office tasks like legal, compliance and so on.
The underlying fund managers are growing over time, and Pinnacle itself is expanding its number of portfolio managers. Some of its latest moves have been to invest in a private equity fund manager, as well as a Canadian fund manager.
While it may go through volatile periods, I think times of a depressed Pinnacle share price are a good time to pounce (such as right now).
Pinnacle is projected to pay a grossed-up dividend yield of 5.75% in FY24 according to CommSec.
Premier Investments Limited (ASX: PMV)
Premier Investments is a retail-focused ASX dividend share, but it's expanding globally through some of its brands. It has brands like Just Jeans, Peter Alexander and Jay Jays that are focused on Australia.
But, Smiggle is a globally-growing business, which sells things like kids backpacks, water bottles, pencil cases and so on. These items can be branded with things like Minecraft, Harry Potter and Marvel art and imagery.
It also has investments in other ASX retail shares including global kitchen appliance business Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR).
In FY24, Premier Investments is expected to pay a grossed-up dividend yield of 5.8%.
Foolish takeaway on ASX dividend shares
At the end of the wealth accumulation phase, investors can sit back and enjoy the cash flow that ASX dividend shares dish out, depending on the investment picks and the yield.
