ASX dividend shares that generate relatively stable profits may deliver more consistent investment income than the broader ASX share market, which could appeal to retirees.
If I were in retirement, I'd want to own stocks that are more likely to continue delivering dividends, even during a downturn. Life expenses continue regardless of what's happening with the economy.
With that in mind, I think the three ASX shares below are candidates for passive income.
Metcash Ltd (ASX: MTS)
Metcash has three divisions – food, liquor and hardware.
With the food division, it supplies IGA supermarkets around the country, and it recently acquired a food distribution business that supplies business customers like cafes, restaurants, hotels, hospitals, and so on.
The liquor division supplies various independent liquor chains, such as Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, and Duncans.
I believe the food and liquor segments can provide defensive earnings with largely consistent demand.
Its hardware division includes several businesses, including Mitre 10, Home Timber & Hardware and Total Tools. Australia's growing population helps drive long-term demand for hardware.
The business is committed to a dividend payout ratio of 70% of underlying net profit after tax (NPAT). According to Commsec, the ASX dividend share is predicted to pay a grossed-up dividend yield of 7.8% in FY25.
Wesfarmers Ltd (ASX: WES)
This business owns various leading retailers, including Bunnings, Kmart, Officeworks, Priceline and Target.
Wesfarmers' biggest profit generators – Bunnings and Kmart – are very well suited to capture market share in the current economic conditions because of their focus on providing customers with value for household products.
The company is investing in new industries, such as healthcare and lithium, that can help diversify and grow Wesfarmers' earnings for retirees (and all other shareholders).
One of Wesfarmers' aims is to grow its dividend over time, and it has delivered that since the onset of COVID-19. The FY24 half-year dividend was hiked by 3.4% to 91 cents per share, and the Commsec projection suggests a grossed-up dividend yield of 4.5% for FY25.
APA Group (ASX: APA)
APA owns vast gas pipelines around Australia that transport half of the nation's gas usage. It also owns other gas-related assets, including gas-powered energy generation. APA has a growing portfolio of renewable energy (solar and wind) and electricity transmission assets.
It has grown its distribution every year since 2004, giving it one of the longest growth streaks on the ASX. The ASX dividend share's cash flow is increasing over time as more pipelines and other assets are completed or acquired.
APA has guided its payout will be 56 cents per security, which translates into a distribution yield of 6.5%.
