I'm going to talk about three ASX dividend stocks that I think are the best to buy right now. I think they're so good that I have invested in all three for my portfolio in the last couple of weeks.
When selecting quality ASX dividend shares, there are a few things I want to see – stability and longer-term dividend growth, a solid dividend yield and a good likelihood of underlying earnings growth.
With that in mind, these are three of my favourites from the S&P/ASX 300 Index (ASX: XKO).
Rural Funds Group (ASX: RFF)
This real estate investment trust (REIT) owns a portfolio of farmland in various agricultural sectors, including cattle, vineyards, almonds, macadamias and cropping.
The business was listed a decade ago and grew its distribution every year between 2014 and 2022. It has maintained its distribution since then as it simultaneously invested in creating macadamia farms while facing higher interest rates. As a longer-term goal, the business wants to grow its distribution by 4% per annum.
Rural Funds' current annualised distribution translates into a distribution yield of 6%.
Its farms are benefiting from organic rental growth, with increases linked to inflation, while other contracts have fixed rental increases, plus occasional market reviews.
The Rural Funds share price is down almost 40% from January 2022, so I think this is a great time to invest.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts may be the king of dividend increases because it has grown its dividend every year since 2000 and paid a dividend every year since it was listed in 1903.
The company started as a pharmacy business, but it's now a very diversified investment house that invests in a wide variety of sectors, including resources, building products, property, telecommunications, financial services, agriculture, credit, swimming schools, and more.
The ASX dividend stock pays for its dividends from the dividends, distributions and interest generated from its portfolio.
There are at least two ways that the business can keep growing its payout. Soul Patts' investments can grow their own payouts to the company, giving Soul Patts more cash flow to work with.
The investment house doesn't pay out all of its cash flow each year – it does retain some of it. Soul Patts can re-invest some of that into new opportunities, which can then deliver growth over the long term.
It has a grossed-up dividend yield of 3.8.
Brickworks Limited (ASX: BKW)
Brickworks is another ASX dividend stock with a very interesting asset base.
While it does operate large building product divisions (it's the market leader of bricks in Australia), other parts of the business attract me to the company for its dividend.
Brickworks has grown its annual dividend per share every year since 2014, so there has been a decade of growth. It hasn't implemented a dividend cut for almost 50 years, which is an incredibly long record of stability.
The business has two main assets to thank for its dividend. It has a large holding of Soul Patts shares, which supply Brickworks with solid dividends and long-term capital growth. The stability of Soul Patts can offset the volatility of Brickworks' building products earnings.
Brickworks also has a 50% stake in a growing industrial property trust where new large warehouses are being built, which is unlocking pleasing rental profits and adding to its ability to pay larger dividends.
It has a grossed-up dividend yield of 3.5%.
