When it comes to ASX dividend shares, it's typically the stocks offering the highest fully-franked yields that get the most attention.
That's why most investors will name the likes of Westpac Banking Corp (ASX: WBC) and BHP Group Ltd (ASX: WDS) when asked which ASX dividend shares they like rather than something like WiseTech Global Ltd (ASX: WTC) or Washington H. Soul Pattinson and Co Ltd (ASX: SOL).
Sure, there is something to be said of the massive and immediate flow of passive income when buying a high-yielding share. But are consistent high-paying ASX dividend shares better than those with small dividend payments but that grow them over time?
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ASX dividend shares: growth vs. consistency
I think this question comes down to your personal circumstances and preferences. For older investors who have perhaps retired, cash flow and franking credits are usually the most important considerations when selecting income-paying shares, with capital growth and maximising returns playing second fiddle.
As such, it might make more sense to target those consistently high-yielding ASX dividend shares like Westpac or BHP if you fall into that category.
After all, if you're in your 70s or 80s, there's arguably less incentive to buy low-yielding ASX dividend shares that might have a massive yield in 20 years' time.
However, that's not the approach I'm taking with my own portfolio. Since I'm still many years away from retirement, maximising my overall returns is a far more pressing goal than maximising dividend cash flow.
Looking at the share prices of some of the ASX's most prolific dividend payers, it's clear that many of these companies sacrifice growth opportunities in order to keep their dividends at the highest levels possible.
Westpac? You can buy this ASX bank's shares today for the same price as you could way back in April 2006. Sure, It's got a 5.85% fully franked dividend yield at present. But you don't get too much more than that.
It's a similar story with BHP. Today, investors who picked up BHP shares at the height of the 2008 mining boom can sell them back without taking much in the way of gains.
High dividend payments have a price.
Income growth comes with share price growth too
I much prefer the likes of Washington H. Soul Pattinson. Soul Patts shares may only offer a dividend yield of 2.58% today. But, as we discussed just yesterday, someone who invested in this prolific dividend grower would have grown their dividend yield on cost from 2.67% up to 22.3%.
That's the position that I think is most conducive to long-term returns. Remember, if an ASX dividend share is consistently growing its profits, it will be able to raise its shareholder payouts over time.
This usually walks hand in hand with the price rises too. Over the 23 years that Soul Patts has hiked its annual dividend from 10.4 cents to 87 cents, its share price has also grown by more than 765%.
Another ASX dividend share I'd consider for growing dividends, and a potentially high future yield on cost is Wisetech Global.
This tech stock first started paying dividends in 2017. That year, investors enjoyed a total of 2.2 cents per share in payouts. But in 2023, Wisetech doled out a total of 15 cents per share.
Yet despite this huge ramp-up in raw dividends going to shareholders, its yield still looks pitiful today at 0.2%. But bear in mind this is because the WiseTech share price has also ballooned 10-fold since 2017.
If it's between WiseTech and Westpac, between BHP and Soul Patts, I'm going to take the ASX dividend share grower any day of the week.
