Why I think these 2 ASX dividend shares are ideal for income investors

I'd choose these stocks for a strong dividend portfolio.

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ASX dividend shares can be a great source of passive income for investors looking for investment cash flow.

Those seeking dividend income will likely prefer businesses that can provide predictable cash flow rather than risky investments with volatile payouts. Ideally, these companies would deliver dividend growth that can offset inflation over time.

Sonic Healthcare Ltd (ASX: SHL)

Sonic provides pathology services in a number of countries. In the first six months of FY24, it made more than $300 million of revenue in Australia, the United States, Germany, Switzerland and the United Kingdom.

In that HY24 report, the ASX healthcare share advised it had maintained its progressive dividend strategy, growing its interim dividend by 2% to 43 cents per share.

Sonic Healthcare has boosted its dividend most years over the past three decades, with just a couple of years in the early 2010s where it maintained the dividend payout.

In FY23, it grew the dividend by 4%. In FY22, it grew the dividend by 9.9%, and in FY21 the dividend was hiked by 7%.

There are a few different reasons I think Sonic can keep increasing its dividend. There's a good organic revenue growth rate – in HY24, it grew by 6%. Revenue is an important driver of profit. The company continues to make acquisitions, boosting scale and unlocking potential synergies.

The ASX dividend share has invested in new technology that could help with pathology, including artificial intelligence (AI) and microbiome testing.

According to Commsec, Sonic Healthcare is projected to pay a dividend yield of 3.7%, excluding franking credits, in FY25.  

Brickworks Limited (ASX: BKW)

Brickworks is best known for being the largest brickmaker in Australia, with one of its leading brands being Austral Bricks. It has other building product businesses, including Austral Masonry, Bristle Roofing, Southern Cross Cement, Bowral Bricks, Daniel Robertson and Nubrik.

The company also has a presence in North America with its Glen Gery business.

It's the other two areas of the business that excite me most about Brickworks' dividend potential. Its property division and investments division are providing the cash flow needed to fund the company's growing dividend.

Brickworks has increased its interim dividend payout for 10 years in a row. And it's been 48 years since investors saw a decrease in the full-year dividend.

The ASX dividend share owns a large stake in investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which provides Brickworks with a growing dividend from its diversified portfolio.

The company also owns a large array of properties, including a 50% stake in an industrial property trust that is steadily building more large-scale warehouses on excess land that Brickworks used to wholly own.

These industrial properties are generating development profits and creating strong rental growth. In the HY24 result, rental income grew by 17%. Brickworks' 50% share of the net trust income was $25 million.

According to the projection on Commsec, Brickworks could pay a fully-franked dividend yield of 2.4% in FY25 or a grossed-up dividend yield of 3.5%.

Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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