Today, I want to talk about an ASX dividend stock that offers investors a 7.2% yield, and that also pays those same investors dividend cash every single month.
Monthly ASX dividend stocks are rare on the ASX. But they do exist. Whilst the BetaShares Dividend Harvester (ASX: HVST) isn't technically a stock, that's what we'll be diving into today.
The BetaShares Dividend Harvester is an exchange-traded fund (ETF) that, as you may have guessed, specialises in providing investors with a healthy stream of dividend income, paid out monthly.
It is able to do so using a rather unconventional method.
The Betashares Dividend Harvester ETF isn't into 'buy-and-hold' investing. The ASX dividend stocks that are in its portfolio are selected ahead of time based on the expectation that they will soon pay out a dividend. Here's how the fund explains it:
In general, the Securities Portfolio will provide exposure to 40 – 60 shares which will be rebalanced approximately every three months. The rebalancing (or 'harvesting') process aims to include in the portfolio the shares that are expected, within the next rebalance period, to provide the highest gross yield outcome.
So put another way, this ETF buys a share that its management thinks will pay out a dividend within the next three months. After the fund secures the dividend, the ASX dividend stock is sold to make way for another company with an upcoming payout.
The most recent data tells us that the largest of these ASX dividend stocks are Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), CSL Ltd (ASX: CSL), Fortescue Ltd (ASX: FMG) and Wesfarmers Ltd (ASX: WES).
So it's by using this harvesting strategy that the BetaShares Dividend Harvester ETF is able to pay out monthly dividends.
An ASX dividend stock with a 6.65% yield?
Over the past 12 months, HVST units have paid out a monthly dividend distribution worth between 6.5 and 7.3 cents per unit. Including February's distribution (scheduled for this Friday), the Betashares Dividend Harvester ETF has paid out a total of 83.8 cents per unit over the past 12 months.
At today's unit price of $12.60, this equates to a yield of 6.65%. That breaks down to a monthly dividend yield of approximately 0.55%.
Before you rush out and secure some HVST units for this sizeable dividend yield though, there's a caveat you should be aware of. The Betashares Dividend Harvester ETF's unconventional ASX dividend stock 'harvesting' strategy may give its units supercharged income. But it comes with a cost too. That cost is overall returns.
As of 31 January, the HVST ETF has delivered a total return (dividends plus share price performance) of 5.94% per the preceding 12 months. However, the BetaShares Australia 200 ETF (ASX: A200), which is a simple ASX 200 index fund, has delivered a return of 7.12% over the same period.
This tells us that the Betashares Dividend Harvester ETF is sacrificing overall returns for higher dividend income. That might suit some investors who just want as much income as possible. For others, it might not be the best approach for your portfolio.
The Betashares Dividend Harvester ETF charges a management fee of 0.72% per annum. In contrast, the Betashares Australia 200 ETF charges 0.04% per annum.
