As most income investors would know, it is normal on the ASX for a dividend share to pay out its shareholder paycheques biannually. That is to say, every six months. You'd be hard-pressed to find a major ASX blue chip share that departs from this formula.
Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW)… all of these companies dole out their dividends twice a year like clockwork.
How common are monthly ASX dividend shares?
There are some ASX investments that do depart from this schedule though. Although far less common, there are a number of ASX dividend shares that fund quarterly dividend payments. Receiving a dividend every three months is actually the norm in many overseas markets, including the United Kingdom and the United States.
But here on the ASX, the shares that tend to opt for quarterly dividends are either exchange-traded funds (ETFs) or shares that are internationally domiciled and have CHESS depository interest (CDI) listings on the ASX. Two prominent examples that come to mind are ResMed Inc (ASX: RMD) and Coronado Global Resources Inc (ASX: CRN).
However, there is one more class of ASX dividend shares that is even rarer still – those that pay out monthly dividends. Of course, receiving a paycheque 12 times a year may sound appealing. But there are but a handful of ASX shares that follow this path. Earlier this month, we discussed one. Today, we'll dive into another.
Metrics Master Income Trust (ASX: MXT) is a listed investment trust (LIT). However, unlike most other LITs, ETFs and listed investment companies (LICs) on the ASX, The Metrics Master Income Trust doesn't invest in a portfolio of other ASX shares, or international shares for that matter.
Instead, it offers investors exposure to fixed-income assets, private credit, and capital market and corporate loan investments.
According to the trust's latest monthly update (covering October 2023), the largest components of the Metrics Master Income Trust's portfolio include real estate investment trusts (REITs), real estate management and development, and hotels, restaurants and leisure.
Building a monthly income payer
In terms of credit quality, this ASX dividend share's portfolio, as of 31 October, was made up of 47% BBB-rated investments, and 41% BB investments. A further 11% consisted of sub-BB assets, with the remaining 1% invested in A or AA assets. It's worth pointing out that any asset rated BBB or above is considered 'investment grade. Whereas any asset rated BB or below is considered sub-investment grade.
It's from the proceeds of these investments that Metrics Master Income Trust funds its monthly dividend distribution payments. Over the 12 months to 31 October, Metrics Master Income Trust has paid out a total of 17.56 cents per share in unfranked dividends (the dividends from this LIT don't usually come franked due to its nature). At the current unit price of $2.04, this gives the Trust a trailing dividend distribution yield of 8.61%.
Looking at this ASX dividend share's history of paying out income, it appears that its ability to fund dividend distributions is quite dependent on interest rates. That's not surprising for an investment that focuses on loans and private credit. For example, 2020 saw the Trust pay out a total of 9.98 cents per unit in dividend distributions. But 2023 so far has had 14.93 cents per unit doled out so far. And that's with another two months to go.
The Metrics Master Income Trust targets a return of 3.25% over the current Reserve Bank of Australia cash rate. Its net return (as of 31 October) has been 9.12% over one year, and an average of 6.21% per annum over the past three years. That gets down to an average of 5.9% per annum over the past five.