Why I think these are 3 of the safest high-yield dividend shares on the ASX right now

Some businesses may be able to keep paying dividends no matter what happens next.

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Key points

  • Propel is one of the leading funeral businesses, exposed to a long-term tailwind and it’s seeing inflation in funeral prices
  • Wesfarmers has a number of businesses that are defensive and/or focused on providing value for customers
  • We all need to eat food, so supermarket business Coles could be another defensive option

There are a number of ASX dividend shares that could offer solid dividends in the short term, though not all of them have high dividend yields.

I also think it's likely that names like Telstra Group Ltd (ASX: TLS) and New Hope Corporation Limited (ASX: NHC) are going to pay pleasing dividends in at least six months.

Telstra was almost an inclusion in this article, but I just wrote about its 5-year outlook in a separate article, so I decided to go for something else.

Dividends are certainly not a guaranteed return like a term deposit. But, the below three ASX dividend shares could continue to pay good payouts in the period ahead.

Propel Funeral Partners Ltd (ASX: PFP)

Propel is the second-largest funeral provider in Australia and New Zealand. Funerals are one of those things that people could be likely to keep paying for, even in a downturn. I think the funeral industry is very defensive. It's one of the two certain things in life, as the saying goes (tax being the other).

But, it's also a growth industry. The ASX dividend share can benefit from inflation if it's able to increase the average revenue per funeral, which increased by 2% in FY22 to $6,038. Funeral volumes are also rebounding after COVID-19. FY22 funeral growth was 8.9% year over year.

Death volumes are expected to increase by an average of 2.9% per annum from 2020 to 2031, according to the ABS. The company is also growing its market share in Australia.

In the first quarter of FY23, total funeral volumes were up 23% and the average revenue per funeral was up 9%, leading to operating earnings before interest, tax, depreciation and amortisation (EBITDA) increasing by 40% to $13 million.

According to Commsec, the Propel share price is valued at 25 times FY23's estimated earnings with a projected grossed-up dividend yield of 4.3%.

Wesfarmers Ltd (ASX: WES)

Wesfarmers has a number of quality businesses in its portfolio including Bunnings and Kmart. I think both of those important retailers are well placed to provide customers with the products they want at affordable prices, enabling the company to retain and perhaps grow market share.

The ASX dividend share also has an impressive chemicals, energy and fertiliser business called WesCEF which is producing strong profit in the current inflation environment. In the future, it could make good money from the lithium project called Mt Holland.

Wesfarmers' recent acquisition called Australian Pharmaceutical Industries (API) gives the company exposure to the healthcare sector, which is quite defensive.

Commsec numbers suggest that the FY23 Wesfarmers dividend could grow by 3.3% to $1.86 per share. This would be a grossed-up dividend yield of 5.5%.

Coles Group Ltd (ASX: COL)

Coles is one of the largest supermarket businesses in Australia. But, it also has the Coles Express service station business and the liquor businesses First Choice Liquor, Liquorland and Vintage Cellars.

The ASX dividend share has seen a lot of volatility since the start of COVID-19. Coles is currently seeing elevated inflation of food prices. This can be a boost for revenue and earnings if margins stay the same or improve. But, Coles is also dealing with cost inflation for wages, rent and the supply chain.

We all need to eat food, so I think that supermarket earnings are more resilient than what some investors may give it credit for.

Commsec numbers suggest that Coles could pay an annual dividend per share of 65 cents, translating into a grossed-up dividend yield of 5.5%.

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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group, Telstra Group, and Wesfarmers. The Motley Fool Australia has recommended Propel Funeral Partners. 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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