2 magnificent ASX dividend shares I'll be buying more of in May

I'm putting my money to work this month with two formidable dividend-paying stocks.

Mitchell Lawler

Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.

Published May 9, 2024 6:30 am AEST

Rather than 'sell in May and go away', I like to 'buy while the cash is cold and hold' — there has to be something catchier… nevertheless, the point still stands. No old saying will prevent me from pulling the trigger on buying if there are looming opportunities in the market.

The fight against inflation waged by the Reserve Bank of Australia continues to threaten a 'genuine' recession. Warren Buffett recently said the investment landscape isn't 'attractive'. And I haven't purchased any individual shares since February… that's bearish, right?

I don't think so.

It might mean those no-brainer buys are harder to find, but I reckon a keen-eyed investor can spot a beauty even now.

A baby reaches into the bottom drawer of a chest of drawers. — Image source: Getty Images

Why buy ASX dividend shares?

I try not to place too much emphasis on income in my portfolio. While still in my younger years, my goal is to maximise wealth growth. Hence, I'm not looking for companies with the highest dividend yield, trying to squeeze out every last dollar I can to fund my next year of activities.

However, if I can find a great quality company that just happens to pay dividends… That's the investing equivalent of finding loose chips in the bottom of the Maccas bag after devouring your fries. You weren't expecting it, but you're glad to see them.

After a while, those dividends add up. I've purchased other ASX shares with money solely sourced from dividends. It feels like I've stumbled upon some sort of money glitch. Whatever 'math' you want to call it, investments funded by income from ASX dividend shares are pretty magical.

I've prattled on long enough. Here's what I'm buying this month.

My bottom drawer buy

It mightn't be a dividend aristocrat, but it's close enough for me. Sonic Healthcare Ltd (ASX: SHL) has steadily grown its dividends for 30 years. That's worthy of some sort of term. Maybe dividend stalwart is fitting.

The laboratory, pathology, and radiology services provider is a cornerstone of healthcare systems worldwide. However, investors have sold down the stock by more than 40% from its all-time high as COVID testing revenues have evaporated.

In my view, the market is overlooking the quality of Sonic's base business. Pathology and laboratory testing is a difficult industry to crack. The value typically accrues to the players with the greatest scale — that's what Sonic Healthcare is in multiple markets.

Due to the sell-off, this ASX dividend share is currently trading on a dividend yield of 4%.

Pouncing on the pullback

Macquarie Group Ltd (ASX: MQG) posted a lacklustre full-year result last week. Net profit for the 12-month period was down 32% versus the prior year, prompting the financial dynamo to dial back its final dividend by 14.4% to $3.85 per share.

The Macquarie share price is now roughly 5% below its 52-week high.

At first glance, the result appears worthy of selling. But let's not be hasty.

I believe Macquarie will still be a frontrunner in the long term. The company houses an immense array of expertise in funding and managing infrastructure. Such skills could be in high demand over the coming decades.

This ASX dividend share is yielding 3.4%.

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