The volatility appears to have settled — for now, at least — after fearful investors rocked the ASX market last week by selling down.
I love investing during sell-offs because that's typically when the best prices are presented. Panicked sellers aren't trying to get the best price. They just want to liquidate their investment.
Lower share prices offer an opportunity to invest in great ASX dividend shares with higher passive income yields.
If a business had a dividend yield of 5% before the sell-off and the share price dropped 10%, the yield becomes 5.5%. If the share price drops 5%, the prospective dividend yield becomes 5.25%.
Considering that, I'd love to buy the ASX dividend shares below after their declines.
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Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
This is one of my favourite companies to invest in for passive income, so I like being able to buy it at a cheaper price. The Soul Patts share price is 2.8% lower than its 1 August 2024 level.
Soul Patts is an investment conglomerate, which means it has a diverse portfolio of assets in different industries. It's invested in resources, telecommunications, building products, property, agriculture, credit, swimming schools, electrification products, and more.
The company is already a century old, and because of its diversified nature, I believe it'll be around for many more decades. The investment team has the flexibility to invest in any asset class and in different-sized businesses.
The company has grown its annual ordinary dividend every year since 2000. It currently has a trailing grossed-up dividend yield of around 3.75%.
Brickworks Limited (ASX: BKW)
Brickworks is a major building products company in Australia. It's the largest brickmaker in the country, and also produces pavers, masonry and stone, roofing, specialised building systems, cement and timber battens.
The ASX dividend share is also the largest brickmaker in the northeastern United States, with a collection of businesses there, including Glen-Gery.
The Brickworks share price is 5.7% lower than on 1 August 2024, making it more attractive to me.
There are two assets that make me particularly excited about this company for passive income.
First, Brickworks is a substantial shareholder in Soul Patts, so it benefits from the underlying diversification, growing dividend, and increasingly valuable portfolio.
Secondly, it owns half of an industrial property trust. That entity is steadily building large industrial warehouses for businesses that need logistics and distribution facilities (due to the growth of e-commerce and the trend of onshoring logistics following COVID-19). These new facilities are increasing the value of the land and unlocking rental profit streams.
Brickworks hasn't cut its dividend for almost 50 years and has grown its annual payout for 10 years in a row. It currently has a grossed-up passive income yield of 3.5%.
Step One Clothing Ltd (ASX: STP)
Step One is a direct-to-consumer online retailer of innerwear. According to Step One, its products are "high quality, organically grown and certified, sustainable, and ethically manufactured". The company has already carved out a decent position in the Australian market, but it's also growing strongly in the US and the United Kingdom.
The Step One share price is down 4.1% from 1 August 2024, making it noticeably cheaper.
The FY24 first-half result was a good showing of its progress – total revenue increased 25.5% to $45 million, with 38% growth in the UK to $14.6 million and 256% growth in the US to $4.1 million.
Growth seems to have accelerated in the second half, with a trading update revealing that FY24 revenue grew by 29% to $84 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 42%, faster than revenue – this demonstrates pleasing operating leverage.
According to the forecast on Commsec, Step One has an FY24 grossed-up passive income yield of 5.7%.
