ASX shares that pay dividends appeal to me because they can provide attractive passive income and also deliver capital growth.
In this article, I'll focus on two high-yielding stocks that have delivered large and growing dividends. I'll include another stock with a lower yield, but that can add a lot of diversification.
If I had $20,000 to unlock a significant level of passive income, the below three would be at the top of my list.
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Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop is a leading retailer of male and female grooming products. The company has grown its annual dividend every year since 2017, which I think is impressive considering all the different financial conditions during that time.
While I can't say for certain if the dividend will keep growing in the short or long term, I think the company aims to keep providing appealing passive income. In the FY24 first-half result, it had this to say:
We are in a strong position to maintain dividends, pursue organic or M&A growth, or consider capital management options.
Shaver Shop could keep growing earnings in the long term thanks to store network expansion, increasing online sales and expanding its product range (particularly exclusive products).
It currently has a grossed-up dividend yield of 12.2%.
GQG Partners Inc (ASX: GQG)
GQG is a growing fund manager that generates nearly all of its revenue from management fees rather than performance fees. Therefore, the growth of funds under management (FUM) is key to revenue and profit.
This ASX share is committed to a dividend payout ratio of 90% of distributable earnings, which is a generous level of passive income. Fund managers don't require much capital to deliver growth as they don't need to open a new factory or warehouse – so the business can grow while also paying large dividends.
The long-term fund performance is attractive and retaining FUM, while also delivering organic FUM growth.
In the first half of FY24, the business saw average FUM growth of 46.5% (partly thanks to net inflows of new client funds), revenue growth of 53% to US$363 million, net profit growth of 56.4% to US$201.2 million and total dividend per share growth of 46.3% to US 5.66 cents.
According to the Commsec forecast, GQG will pay an annual dividend per share of 20.6 cents for FY24, which is a dividend yield of 7.6%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is a diversified ASX share that owns a wide variety of assets, including large-cap ASX shares, small-caps, credit/bonds, private equity and property.
The business has grown its annual ordinary dividend per share every year since 2000, which is the best record on the ASX.
Some of its company investments include Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPG), New Hope Corporation Ltd (ASX: NHC), Tuas Ltd (ASX: TUA), BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG), Commonwealth Bank of Australia (ASX: CBA) and Wesfarmers Ltd (ASX: WES).
Pleasingly, it has paid a dividend every year since it listed 120 years ago.
It currently has a grossed-up dividend yield of 3.8%.
Foolish takeaway
I think it's a good idea to invest in more than three stocks for dividends, but I'm a fan of these three.
If we evenly split $20,000 between the above three names, with a current average grossed-up dividend yield of around 7.8%, that would create an annual income of $1,560, with a good chance of future dividend growth.
I'd probably want to allocate more than a third of my $20,000 to Soul Patts shares because of the strong underlying diversification – it would lower the average yield, but I think it would also lower the risks.
