Investing in ASX dividend shares can be a great way to generate a steady stream of passive income. However, many people believe that they need a large sum of money to get started. Especially if they're wanting diversification.
The truth is, some modern-day brokerage accounts offer no minimums, making the building of a diversified dividend portfolio for regular income much more achievable.
In this article, I highlight seven high-yielding ASX shares that can be invested in for under $10 each, unlocking the chance to create a diversified income stream with less than $70 from day one.
Note: All dividends in the charts below are semiannual dividends per share
Finding income in financials
The financial sector is a common area of the market among investors to go hunting for dividends.
A quick look at the big four banks will reveal consistently strong earnings margins and dividend yields that would make interest on a savings account look disappointing. Though, these mammoths of Australian finance are all above the $10 threshold, prompting a further search elsewhere.
Two possible alternatives that come to mind are Magellan Financial Group Ltd (ASX: MFG) and Bank of Queensland Ltd (ASX: BOQ) at $8.83 and $6.49 a pop, respectively.
Magellan, an Australian funds manager, has experienced a sharp reduction in dividends recently (shown above) due to a mass exodus of funds under management. However, the similarly large fall in the company's share price has resulted in a yield of 13.1%.
Whereas, the Bank of Queensland dividend has bounced back after getting ditched during the pandemic. Currently, the retail bank is offering up a 7.1% yield, assuming it remains stable.
ASX retail shares raining dividends
Lately, some of the highest dividend yields can be found among ASX retail shares. Exceptionally sturdy results paired with a forward-looking market have, in many cases, suppressed share prices and driven yields skyward.
A $10 cap might rule out iconic companies such as Wesfarmers Ltd (ASX: WES) and JB Hi-Fi Limited (ASX: JBH), but there are still some quality names in the mix. Three ASX dividend shares that could jumpstart the passive income engine are:
- Shaver Shop Group (ASX: SSG) at $1.05 per share
- Nick Scali Limited (ASX: NCK) at $9.29 per share; and
- Accent Group Ltd (ASX: AX1) at $2.29 per share
As shown above, all three of these retail shares handed out dividends that have been gradually trending higher over the past five years. Furthermore, each of the above companies sells different products, ranging from grooming products to footwear.
At the time of writing, these three companies — Shaver Shop, Nick Scali, and Accent — offer dividend yields of 9.7%, 8.1%, and 7% respectively.
Sold-off ASX dividend shares
Lastly, if picking up some dividend-payers that have had a tough trot so far this year is of interest, here are two possibilities.
Filling out the final spots of the seven ASX dividend shares are Whitehaven Coal Ltd (ASX: WHC) and Rural Funds Group (ASX: RFF), trading at $6.67 and $2.00. These companies provide exposure to energy and real estate, adding further diversification.
Reported net profits after tax (NPAT) for these two have launched to new heights for the past trailing 12-month periods. At the same time, shares in both have staggered lower in 2023.
Of all the sub-$10 shares on this list, Whitehaven Coal is possibly the one with the most volatile history for dividends. Whereas, Rural Funds has been steadily increasing its dividends to shareholders over the years.
Foolish takeaway
Overall, the average yield across all seven ASX dividend shares is around 8.8%. And, for reference, buying one share of each would come to a total of $36.62.
That's not too shabby for some extra income in the back pocket. However, I personally think focusing on fundamentals can produce far superior returns in the long run. Ultimately, the share price provides little to no insight into the quality or 'cheapness' of an investment.
Another approach could involve identifying one high-quality dividend share and investing in it regardless of the share price — whether above or below $10.
