Where I'd invest $30,000 in ASX shares for passive income

I think stocks are all strong ideas for dividends.

| More on:
Two laughing male executives wearing dark suits chat across a timber lunch room table while one of them holds up his phone to show information.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX shares can be a powerful way to generate passive income. In this article, I'll discuss four picks that offer great dividends.

I'm not just looking for the biggest dividend yield as very high yields are not always sustainable. Instead, I like to find businesses delivering good organic operational growth because that is what can unlock capital gains.

If I were investing $30,000, I'd be very happy to spread the money across the below four stocks.

Healthco Healthcare and Wellness REIT (ASX: HCW)

As the name suggests, it's a real estate investment trust (REIT) that owns buildings in the healthcare and social space. Hospitals are one of the main categories of property within the portfolio.

It's indirectly benefiting from tailwinds like the ageing population and the growing Australian population.

The ASX share has an occupancy rate of 99%, with 75% of its leases linked to CPI – it's generating solid rental growth. The business also has a large development pipeline worth at least $1 billion, which can generate further rental profits. The weighted average lease expiry (WALE) is around 12 years, suggesting appealing long-term rent is locked in.  

It's expected to pay a distribution of 8 cents per unit in FY24, which would be year-over-year growth of 5%. This would be a distribution yield of 5.6%.

Telstra Group Ltd (ASX: TLS)

Telstra is the leading telecommunications company in Australia. One of the most attractive elements of the business is that it continues to win new subscribers. Spreading more subscribers over the same network has the potential to increase profit margins. Not only that, but its average revenue per user (ARPU) is rising.

The business has a goal of increasing the annual passive income per share for shareholders over time.

It's projected to pay an annual dividend per share of 18 cents per share in FY24, which would be a grossed-up dividend yield of 6.7%. By FY26 it could be paying an annual dividend per share of 20 cents, which would be a grossed-up dividend yield of 7.4%.

Metcash Ltd (ASX: MTS)

Metcash is the ASX share that supplies a large number of food and liquor businesses including IGA, Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, Big Bargain Bottleshop and Duncans.

It also has a hardware division which includes the businesses Total Tools, Mitre 10, Home Timber & Hardware and other smaller names. It recently announced it's acquiring one of the largest frame and truss businesses.

I like the move by the business to acquire Superior Food, an industry leader servicing a broad range of customers across the food service sector. It has partnerships with mining sites, restaurants, cafes, canteens, caterers, schools, universities, healthcare and aged care facilities.

The ASX share is committed to a passive income dividend payout ratio of 70% of underlying net profit after tax (NPAT). It's projected to pay a grossed-up dividend yield of 7.3% in FY24.

Centuria Industrial REIT (ASX: CIP)

This is another REIT that has impressive metrics and a strong rental outlook. It has a portfolio occupancy rate of 97.2% and a portfolio WALE of 7.5 years.

One of the most impressive elements is that in the FY24 first-half result, it achieved positive re-leasing spreads of 51% across 17 transactions. This essentially means its rental income is 51% higher on the new rental contracts compared to the former contract.

This extraordinary rental income growth shows the huge demand for logistics properties and could unlock excellent rental profit growth in the coming years as all of the contracts come up for renewal.

The ASX share has identified a $1 billion future urban infill industrial development pipeline, "capitalising on sustained tenant demand", in the business' words.

It's expecting to pay a distribution of 16 cents per unit in FY24, which would be a distribution yield of 4.5%. I expect the distribution to grow significantly over the rest of the decade.

Motley Fool contributor Tristan Harrison has positions in Metcash. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Metcash. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Man holding Australian dollar notes, symbolising dividends.
Dividend Investing

2 safe ASX dividend shares that have paid income for decades

I think these two stocks are about as safe as it gets for dividend income.

Read more »

A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall
Energy Shares

Own Woodside shares? Today is payday!

Woodside is set to reward passive income investors today.

Read more »

Woman holding $50 and $20 notes.
Dividend Investing

5 excellent ASX dividend stocks to buy in April

Analysts have put buy ratings on these income options recently.

Read more »

Woman with $50 notes in her hand thinking, symbolising dividends.
Dividend Investing

Should ASX investors buy Metcash stock for its 5.7% dividend?

Here's my take on Metcash's current dividend yield.

Read more »

Hand of a woman carrying a bag of money, representing the concept of saving money or earning dividends.
Dividend Investing

These ASX 300 dividend shares offer yields of 5% to 8%

Analysts think big yields could be coming for owners of these shares.

Read more »

Excited woman holding out $100 notes, symbolising dividends.
Dividend Investing

Passive income investors, beat the ASX with this cash-gushing dividend stock!

I believe this top ASX dividend stock will continue to offer ASX beating passive income.

Read more »

a hand reaches out with australian banknotes of various denominations fanned out.
Dividend Investing

Here are the top five ASX 200 stocks in Macquarie's model income portfolio

Income investors might want to check out this model portfolio.

Read more »

pair of scissors cutting one hundred dollar note representing cut dividend
Resources Shares

Are your big ASX 200 mining dividends in for a chop?

Are the appealing dividends about to come to an end?

Read more »