ASX shares that pay dividends can be a wonderful source of passive income — which might be exactly what retirees, in particular, are looking for.
The Australian Securities Exchange (ASX) includes many of the country's leading businesses, such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Telstra Group Ltd (ASX: TLS).
However, the biggest ASX blue-chip shares aren't necessarily the most resilient or the best dividend-paying options. If I were a retiree, I'd want to have the following two stocks in my income-focused portfolio.
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Medibank Private Ltd (ASX: MPL)
Medibank is the leading private health insurer in Australia with two main brands – Medibank and ahm.
People tend to value their health highly, so I'd guess that many would continue paying for private health insurance even during an economic downturn.
One of the growth drivers of the business is the ageing population in Australia, which may mean more people sign up to have private health insurance for any operations or specialised care they may need. Indeed, Australia's overall population is rapidly increasing too, which is helping grow the number of potential policyholders.
Medibank's FY24 first-half result demonstrated its steady growth — group revenue from external customers grew by 3.3% to $4 billion, with group operating profit growing by 4.2% to $319.4 million.
The ASX share had a generous dividend payout ratio of 75.5% in HY24, enabling it to pay a dividend per share of 7.2 cents (a 14.3% year-over-year rise).
According to Commsec, the business could pay a grossed-up dividend yield of 6.2% in FY24.
Centuria Industrial REIT (ASX: CIP)
This business is the largest pure-play industrial real estate investment trust (REIT) in Australia.
It benefits from strong tenant demand that is skewed to urban markets as industrial users prioritise proximity to a large population. There is limited new supply within these markets – the REIT's manager Jesse Curtis recently said:
…rental growth is expected to be prolonged providing the opportunity for continued positive rental reversion. Additionally, CIP's embedded development pipeline provides the optionality to unlock further value to take advantage of the mismatch between supply and demand and deliver value to unitholders.
The ASX share is seeing enormous rental growth – in the FY24 first-half result it reported positive re-leasing spreads of 51%. That means that new rental contracts are showing a 51% increase compared to the old rental rate those buildings were on.
The business expects to pay a distribution of 16 cents per unit in FY24, which is a forward distribution yield of 4.6%. I think it can provide stable and resilient rental profits for retirees.
