If you could use some passive income to ease the load in the current economic times, read on.
The start of the new financial year is a fine time to pave the way towards an earn more-work less life plan.
We asked our Motley Fool writers to nominate their favourite ASX passive income shares. Here's what they've come up with:
6 best passive income shares for July 2023 (smallest to largest)
- Jumbo Interactive Ltd (ASX: JIN), $897.73 million
- Accent Group Ltd (ASX: AX1), $939.18 million
- Charter Hall Long WALE REIT (ASX: CLW), $2.93 billion
- Metcash Ltd (ASX: MTS), $3.68 billion
- Suncorp Group Ltd (ASX: SUN), $17.01 billion
(Market capitalisations as at 4 July 2023)
Why our Foolish writers love these ASX passive-income stocks
Jumbo Interactive Ltd
What it does: From humble Brisbane beginnings in 1995, Jumbo Interactive has grown to become an international digital lottery provider. The company operates across three segments: lottery retailing, software as a service (SaaS), and managed services.
By Mitchell Lawler: The last thing you want when investing for passive income is for the dividends to stop flowing during tough times. That's why Jumbo Interactive would be my top pick to deliver a reliable stream.
History has shown Australian lottery sales to be resilient through economic weakness. Additionally, Jumbo has long-tenured agreements with its partners, providing an extra layer of assurance.
Some dividend investors may baulk at Jumbo's dividend yield of 3.1% – a lesser rate than the S&P/ASX 200 Index's (ASX: XJO) 4.5%. Reassuringly, the company is expecting to be pushing out significant price increases, which should bolster earnings.
Motley Fool contributor Mitchell Lawler owns shares in Jumbo Interactive Ltd.
Accent Group Ltd
What it does: Accent is a footwear-focused retailer which owns a collection of popular store brands. This includes HYPEDC, Platypus, Stylerunner, and The Athlete's Foot.
By James Mickleboro: I think Accent could be a top passive income option in July. This is due to a recent sell-off, which I believe has created a compelling buying opportunity for investors.
Bell Potter estimates that the retailer's shares are changing hands for under 11x FY 2023 and FY 2024 earnings. I feel this is dirt cheap for a company that looks likely to be more resilient in the tough economic environment given how casual footwear and fitness and wellness-related spending remains a priority for consumers.
As for dividends, Bell Potter is expecting fully franked dividends per share of 6.5 cents in FY 2023 and 16.1 cents in FY 2024. This represents yields of 3.9% and 9.7%, respectively.
Motley Fool contributor James Mickleboro does not own shares of Accent.
Charter Hall Long WALE REIT
What it does: The Charter Hall Long WALE REIT is a real estate investment trust (REIT) that owns a large property portfolio. Its properties all have long weighted average lease expiries (WALEs), meaning the tenants are locked in for many years at a time.
By Sebastian Bowen: The Charter Hall Long WALE REIT is a dividend investment I've been eyeing off for this July. Like many REITs, its valuation has been hit hard by rising interest rates over the past year or so. But this has done nothing to damage the quality of this REIT's property assets in my view.
The Long WALE REIT owns properties like government offices, pubs, supermarket distribution centres, and warehouses. Most of these buildings are under long-term leases with the REIT, with rental rises (often linked to inflation) locked in as well.
Partly due to the REIT's falling unit price over the past 18 months, its dividend distribution yield is now approaching 7%. Thus, it is a hard one to look past right now.
Motley Fool contributor Sebastian Bowen does not own units of the Charter Hall Long WALE REIT.
Metcash Ltd
What it does: Metcash supplies independent retailers like IGA, Cellarbrations, The Bottle-O, IGA Liquor, and Porters Liquor. It also owns the hardware brands Home Timber & Hardware, Total Tools, and Mitre 10.
By Tristan Harrison: The recent FY23 result from Metcash has reinforced my view that this is a top passive income pick.
Underlying profit grew 4.6% to $307.5 million, while statutory net profit rose 7.6% to $259 million. Metcash grew its total dividend by around 5% to 22.5 cents per share. The company reported all of its pillars continue to perform well, with ongoing strong demand.
And it seems growth could continue. In the first seven weeks of FY24, group sales rose by 2.3%. Management is confident in delivering "growth and superior returns for shareholders through the cycle".
The dividend yield and price-to-earnings (p/e) ratio both look appealing to me. According to Commsec, Metcash is valued at 13x FY24's estimated earnings with a projected FY24 grossed-up passive income dividend yield of around 7.9%.
Motley Fool contributor Tristan Harrison does not own shares of Metcash Ltd.
Charter Hall Group
What it does: Charter Hall is an Australian property investment and funds management company. Its core business is in managing funds for retail and institutional investors and listed real estate investment trusts (REITs).
By Bronwyn Allen: One of the most appealing aspects of Charter Hall shares is the decade-long history of increasing dividends year after year.
The ASX property share paid 42.5 cents per share in dividends with 45% franking for FY23. It went ex-dividend on its final payment last week.
Top broker Citi has a buy rating on the stock based on valuation, with a 12-month share price target of $14.60. It forecasts dividends of 45 cents in FY24 – a 5.9% annual increase.
Based on the current Charter Hall share price of $11.11, this will mean a yield of 4%.
Motley Fool contributor Bronwyn Allen does not own shares in Charter Hall.
Suncorp Group Ltd
What it does: Suncorp is a financial services conglomerate offering retail and business banking, general insurance, superannuation, and investment products. The company's primary businesses are insurance and banking & wealth.
By Bernd Struben: Suncorp shares are up 22% over 12 months. The company also paid out two fully franked dividends totalling 50 cents per share. That equates to a trailing yield of 3.7%.
I think the next 12 months could see more share price gains and a marked improvement on that yield, which came amid a period of relatively high claims. Insurance premiums have increased recently. And inclement weather conditions should, hopefully, subside as El Nina gives way to El Nino.
Indeed, Goldman Sachs forecasts Suncorp shares will deliver 79 cents in dividends in FY23 and the same in FY24. That's a yield of 5.9% at the current share price. Goldman has a price target of $14.53 on Suncorp, representing a potential upside of 8%.
Rounding it off, Suncorp shares could get a boost in July when the ACCC announces its decision on ANZ's proposed acquisition of Suncorp's banking business.
Motley Fool contributor Bernd Struben does not own shares in Suncorp Group.
