ASX dividend shares are a great source of passive income because of the dividend yield they offer and the growth they can deliver.
The biggest dividend yields aren't necessarily the best – they may be more in danger of being cut, and a higher dividend payout ratio means there's less reinvesting of profit back into the business.
Having said that, these are some of the ASX dividend shares that I like right now that I'd happily put $3,000 into.
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Centuria Industrial REIT (ASX: CIP)
This is a real estate investment trust (REIT) that owns industrial properties in key Australian cities. There is a shortage of quality locations in these markets but this business has a very high occupancy rate of 98.6% as of the first quarter of FY24.
The strong demand for industrial properties is leading to very pleasing rental income growth. The FY24 first quarter saw re-leasing spreads of 48% – in other words, the business is getting a lot more rent than it was for the same properties on the prior rental contracts.
The business is expecting to pay a distribution of 16 cents per unit in FY24, which translates into a forward distribution yield of around 5%.
Brickworks Limited (ASX: BKW)
Brickworks has an impressive dividend history – it hasn't cut its dividend for almost 50 years. That means it has maintained or grown its dividend every year over those decades.
The ASX dividend share has had a large stake in the investment house Washington H. Soul Pattinso and Co. Ltd (ASX: SOL), which has a diversified portfolio and has helped provide Brickworks with a growing dividend and growing capital value. The stability of the Soul Patts shares can offset the volatility of the building products division.
It's impressive that Brickworks is the largest brickmaker in Australia. But, what I like most about this segment is the excess land it has steadily sold into a joint industrial property trust. Large warehouses are then built on that excess land.
As I mentioned in the Centuria Industrial REIT section, there's strong demand for commercial properties, which can help the rental profit and underlying value of Brickworks.
At the current Brickworks share price, it has a trailing grossed-up dividend yield of 3.3%.
Metcash Ltd (ASX: MTS)
Metcash is a major supplier of food to IGA supermarkets around Australia, as well as independent liquor stores across a number of brands including IGA Liquor, Cellarbrations, The Bottle-O, Thirsty Camel and Porters Liquor.
The business also has an impressive hardware division which includes Mitre 10, Home Timber and Hardware, and Total Tools.
I like that Metcash has committed to a dividend payout ratio of 70% of underlying net profit. Combined with a low valuation, it creates a very appealing dividend yield for the ASX dividend share.
According to Commsec, it's trading at under 14 times FY24's estimated earnings with a grossed-up dividend yield of 8.2%. That's why I decided to invest – for the attractive metrics and solid hardware division.
