ASX dividend stocks can be very pleasing to own for the regular passive income that they pay to investors.
There's been a lot of focus on inflation over the last 12 months, as well as market speculation about how high interest rates are going to go to try to stifle demand. Hence, some types of businesses could be better to buy than others.
In this article, I will outline some ways to determine the best kinds of ASX dividend stocks going forward in FY24.
Where I'm wary of ASX dividend stocks
Some businesses are heavily exposed to the changing economic situation.
ASX bank shares are not immune to the situation, they may see higher arrears and bad debts during this period. But, they have built up a strong capital position over the last few years which should be a helpful cushion for the economy.
However, the competition for banks this financial year and for the foreseeable future means that profit growth may be challenged in FY24, so I don't think the banks currently offer the most resilient dividends or offer much growth potential.
It's also quite possible that a number of ASX retail shares are going to see year-over-year declines in profit and the dividend because of what's happening with tightening household budgets. However, I do believe that some retailers could be at attractive valuations for the longer term and may make good buys right now for FY25 and beyond.
Opportunities for passive income
I think the ASX dividend stocks that are going to do well during FY24 will be the ones that continue to generate good cash flow and could continue to fund good passive income to investors.
Plus, businesses need to have good enough balance sheets so that they can endure the higher interest rate costs and be successful during this period.
While I'm not expecting iron ore ASX shares to soar, the iron ore demand from China could be strong enough for those businesses involved to generate enough cash flow for good dividends for shareholders.
I do think there's an opportunity in the property sector because some businesses may have been oversold. Names like Brickworks Limited (ASX: BKW), Centuria Industrial REIT (ASX: CIP), Rural Funds Group (ASX: RFF) and Charter Hall Long WALE REIT (ASX: CLW) could continue to pay attractive payouts as they receive consistent rental income.
Defensive retailers could generate solid earnings regardless of what's going on, so resilient profit could pay attractive dividends. I'm thinking of names like Wesfarmers Ltd (ASX: WES), Metcash Ltd (ASX: MTS) and Coles Group Ltd (ASX: COL).
Finally, I'm attracted to fund managers that are now trading at a lower price/earnings (P/E) ratio than they used to. Funds under management (FUM) is holding up for some companies, so I think those ones are attractive ASX dividend stock ideas for FY24 including GQG Partners Inc (ASX: GQG) and Pinnacle Investment Management Group Ltd (ASX: PNI).
