Overinvested in CBA shares? Here are two alternative ASX dividend stocks

It could be smart to diversify with these passive income ideas.

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Commonwealth Bank of Australia (ASX: CBA) is one of the biggest and most popular investments in Australia. But, there are plenty of other ASX dividend stocks that can provide passive income.

CBA has delivered solid returns over the past three years. But I believe diversification is an essential part of almost any investment strategy. Having all or most of one's dividend eggs in one basket could be a recipe for trouble if the banking sector experiences trouble, such as elevated bad debts.

Other businesses can provide a pleasing level of dividend income compared to CBA's current grossed-up dividend yield of 5.5%. The below two ASX shares could be compelling options to diversify a dividend portfolio.

Medibank Private Ltd (ASX: MPL)

Medibank is the largest private health insurance business in Australia with its Medibank and ahm brands.

A core driver of earnings for Medibank is how many policyholders it has. In the FY24 first-half result it reported a 0.2% (or 3,400) increase in net resident policyholder numbers and a 12.3% (or 33,800) rise in net non-resident policy units. In a recent update, the business said that based on its performance in the three months to March 2024, it "remains on track" to deliver on its guidance of resident policyholder growth of between 1.2% and 1.5% in FY24.

More policyholders can result in stronger operating profit and a growing dividend for the ASX dividend stock – HY24 group operating profit rose 4.7%, helping fund a 14.3% increase to the dividend per share.

I believe there are tailwinds for the company's policyholder numbers and profit with Australia's growing and ageing population.

Healthcare is a relatively defensive sector – people usually place a high value on their health, so private insurance demand could remain strong in the years ahead.

According to the estimate on Commsec, at the current Medibank share price, shareholders could receive a grossed-up dividend yield of 6.3% in FY24.

Charter Hall Long WALE REIT (ASX: CLW)

This is a diversified real estate investment trust (REIT) that owns property across a variety of sectors including agri-logistics, social infrastructure, office, industrial and logistics, hospitality, service stations and quality retail. It has a portfolio occupancy rate of 99.9%, which is very high.

Examples of some of the key tenants include the Australian government, Telstra Group Ltd (ASX: TLS), BP and Endeavour Group Ltd (ASX: EDV). Having blue-chip tenants like this should mean the rental income is resilient.

Pleasingly, the business has a weighted average lease expiry (WALE) of more than 10 years. This means there is a high level of income security and rental visibility for the coming years.

While debt costs have increased, the ASX dividend stock's rental income continues to grow. Around half of its leases are linked to CPI inflation, it's expecting to report a 5.4% weighted average increase in FY24. The other half of leases have fixed annual increases, with an average fixed increase of 3.1%.

It's expecting to pay a distribution per unit of 26 cents in FY24, which translates into a current distribution yield of 7.5%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. 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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