Where I'd invest $10,000 in dividend stocks

Here are a few ASX dividend shares I'd consider buying for income if I had a spare $10,000 hidden under my mattress.

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Dividends can be a great source of passive income.

In fact, putting your savings to work by investing it in some high-quality ASX dividend shares is one of the easiest ways you can earn some extra money. All you have to do is buy the stocks and then sit back and wait for your payments to start rolling in.

And – luckily for us ASX investors – there are plenty of great options to choose from when it comes to ASX dividend shares. Many dividend shares also come with juicy franking credits attached, which can come in handy at tax time (especially if you're a retiree). So, without any further ado, here are a few ASX dividend shares I'd consider buying for income if I had a spare $10,000 hidden under my mattress.

Helia Group Ltd (ASX: HLI)

Helia Group is an insurance company that specialises in Lenders Mortgage Insurance ('LMI'). In fact, Helia was the first LMI provider in Australia.

Usually, you need to put up at least a 20% minimum deposit with a lender if you want to take out a mortgage to purchase a home. However, LMI makes it possible to buy a home with as little as a 5% initial deposit. Rather than put up the remainder of the deposit, a mortgage applicant can take out LMI, which protects the lender against the heightened risk that they'll default on their repayments. Dividends have increased in recent years, with Helia paying out 59 cents per share in FY23 (including a special unfranked dividend of 30 cents per share).

Based on the current stock price of $4.07, this ASX dividend share trades on a whopping grossed-up dividend yield of 17.6%.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is an Australian active fund manager specialising in global equities and infrastructure stocks. It currently manages more than $37 billion on behalf of retail, high net worth, and institutional investors.

Magellan is an active fund manager, which means it develops its own in-house investment strategies with the hopes of outperforming the market. It also screens out investments based on Environmental, Social and Governance (ESG) considerations.

Magellan has a history of paying shareholders consistent dividends and currently boasts a grossed-up dividend yield of 14.6%.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

No list of ASX dividend shares would be complete without Washington H. Soul Pattinson (or 'Soul Patts' to its friends).

Soul Patts has a proud history of delivering consistent dividends to its shareholders. In fact, the company claims to have never missed a dividend payment since it first listed on the stock market all the way back in 1903. That's some track record.

Soul Patts is an investment house focused on delivering long-term returns to its shareholders. Its grossed-up dividend yield of 4% might seem a little low compared to some of the other options on this list, but its diversified portfolio – which includes private equity and property investments – is designed to perform well regardless of the state of the wider economy. This makes Soul Patts a favourite of ours here at the Fool, and a good defensive share to consider adding to your portfolio.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

The last ASX dividend share on my list is actually an exchange-traded fund (ETF). The Vanguard High Yield ETF invests in a diversified portfolio of high dividend, mostly large cap, ASX stocks. It is a low-risk option for investors seeking to generate some income from their share portfolio.

Its largest holdings include some of the biggest and most recognisable companies on the ASX, like Commonwealth Bank of Australia (ASX: CBA), mining giant BHP Group Ltd (ASX: BHP) and leading Australian oil and gas company Woodside Energy Group Ltd (ASX: WDS).

This ASX dividend share currently has a dividend yield of 5.5%.

Motley Fool contributor Rhys Brock has positions in Commonwealth Bank Of Australia. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Vanguard Australian Shares High Yield ETF. 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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