Some ASX dividend share payouts have been growing for shareholders every year for many years, which could be good for retirees. However, other dividend payers are somewhat volatile with their passive income.
If I were relying on dividend income in retirement, I don't think I'd want to see my dividend income jump around. That's why I'm cautious about buying names like BHP Group Ltd (ASX: BHP) and Woodside Energy Group Ltd (ASX: WDS) after a strong run.
Rural Funds Group (ASX: RFF)
Rural Funds is a real estate investment trust (REIT) that owns a portfolio of farmland around Australia including cattle, almonds, macadamias, vineyards and cropping (sugar and cotton).
With interest rates now a lot higher, it has pushed down the Rural Funds share price. Since the end of 2021, it has fallen by around 20%. This has the effect of pushing up the prospective distribution yield for the ASX dividend share.
How much passive income could the business pay? Rural Funds aims to grow its distribution by 4% per annum, which is normally faster than inflation.
It's expected to pay a total distribution of around 12.2 cents per unit, which would be a forward distribution yield of around 5%. That'd probably be a good yield for retirees.
On the rental side, the business is benefiting from inflation because some of the rent is linked to CPI inflation.
Farmland has been a useful asset for centuries, which I think will continue for more than the foreseeable future.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
The ASX dividend share could be the steadiest eddy in terms of passive income. It has grown its dividend every year since 2000, which is the longest streak on the ASX.
Soul Pattinson is an investment house that's invested in a variety of assets, including ASX shares like Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPG), Pengana Capital Group Ltd (ASX: PCG), New Hope Corporation Limited (ASX: NHC), Macquarie Group Ltd (ASX: MQG) and many more.
It also has a portfolio of unlisted businesses including electrical parts, agriculture, swimming schools, luxury retirement living and so on.
Soul Pattinson expands its portfolio every year while paying out a majority of its cash flow each year as a dividend.
The business' portfolio is focused on investments that can provide good cash flow through the economic cycle, while also looking for platforms of growth. I think retirees would like this combination of dividends and growth.
How much passive income will the company pay in FY23? Commsec numbers currently suggest that Soul Pattinson could pay an annual dividend per share of 77 cents, which translates into a grossed-up dividend yield of 3.8%. The Soul Pattinson share price is down around 25% since September 2021.
