A number of ASX bank shares are hitting 52-week highs, but I'm not calling them buys at this price. There are other ASX dividend shares I'd look to for income.
ANZ Group Holdings Ltd (ASX: ANZ) shares, National Australia Bank Ltd (ASX: NAB) shares and Westpac Banking Group (ASX: WBC) shares all hit 52-week highs today.
Buying ASX bank shares at such high levels doesn't strike me as good value. Not only are they trading at a high price/earnings (P/E) ratio, but it also means the dividend yields have been pushed lower.
Instead, there are other two main groups of shares I'd look at for opportunities.
High dividend yield
With the banks' yields now smaller than before, I think there are plenty of other companies capable of producing better dividend yields, and those stocks may be able to grow the dividends in the coming years.
I think some companies that could pay big yields in the coming years include GQG Partners Inc (ASX: GQG), Medibank Private Ltd (ASX: MPL), Telstra Group Ltd (ASX: TLS), Universal Store Holdings Ltd (ASX: UNI), Accent Group Ltd (ASX: AX1), Duxton Water Ltd (ASX: D2O) and Metcash Ltd (ASX: MTS).
I believe all of these ASX dividend shares can pay more substantial dividends over time than the big banks.
It could also be worth looking at real estate investment trusts (REITs) because they offer stable rental income and good yields, while the prospect of falling interest rates could boost valuations. Four of my favourites include Rural Funds Group (ASX: RFF), Centuria Industrial REIT (ASX: CIP), Charter Hall Long WALE REIT (ASX: CLW) and Healthco Healthcare and Wellness REIT (ASX: HCW).
Dividend growers
I like businesses that are capable of growing profit over time because that can drive both the underlying value of the business as well as the dividend.
However, these sorts of businesses normally have a lower dividend yield because the market is pricing in longer-term growth expectations. Plus, those businesses are typically retaining more profit to invest for growth.
I think there's a good chance that dividend growers can deliver better total returns than ASX bank shares over the next three or five years.
Some of my favourites include Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW), Duxton Water, Sonic Healthcare Ltd (ASX: SHL), Wesfarmers Ltd (ASX: WES), Pinnacle Investment Management Group Ltd (ASX: PNI) and Johns Lyng Group Ltd (ASX: JLG).
