ASX blue-chip shares can be a great opportunity to look for businesses that provide pleasing levels of passive income.
A higher dividend yield could be particularly for attractive for Aussies who are seeing their income fall from savings accounts because of RBA rate cuts.
Blue-chips can be effective options because they are large enough that they can pay out some of their profits as a dividend and keep some profits so they can reinvest for further growth.
I'll look at two ASX blue-chip shares that are paying large cash payments to shareholders these days.
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Charter Hall Long WALE REIT (ASX: CLW)
This is a real estate investment trust (REIT) which is invested across a variety of sectors including telecommunication exchanges, data centres, hotels/pubs, grocery and distribution, service stations, government-tenant offices, food manufacturing and so on.
This business leases its buildings to numerous blue-chip tenants such as Endeavour Group Ltd (ASX: EDV), Australian government entities, Telstra Group Ltd (ASX: TLS), BP, Metcash Ltd (ASX: MTS), Coles Group Ltd (ASX: COL), David Jones, Arnott's, Wesfarmers Ltd's (ASX: WES) Bunnings, Westpac Banking Corp (ASX: WBC) and so on.
One of the most pleasing elements of this business is its long portfolio weighted average lease expiry (WALE). This means the business has long-term income security and it's easy for investors to see how much rental income has already been locked in.
Pleasingly, the business is benefiting from regular rental increases from both annual fixed increases as well as inflation-linked rises.
How big is the dividend yield? Its distribution per security is 25 cents, which translates into a distribution yield of 6.2%.
Challenger Ltd (ASX: CGF)
Challenger is the market leader of providing annuities to Australian retirees, helping them turn their nest egg into a stream of guaranteed income.
It's very important that retirees pursue an appropriate investment strategy so their income keeps flowing and their capital doesn't run out.
The company is exposed to useful tailwinds because of more customers due to Australia's ageing population. Secondly, the superannuation pool of assets is growing thanks to contributions and compounding their balances.
Challenger seems to be providing the right balance between rewarding shareholders and growing the business. The ASX blue-chip share grew its interim dividend per share by 12% to 14.5 cents.
According to the forecast on Commsec, the business is forecast to pay an annual dividend per share of 30 cents in FY25. At the current Challenger share price, that translates into a grossed-up dividend yield of 5.3%, including franking credits. I'm expecting further dividend growth in the coming years.
