ASX dividend shares are a popular investment vehicle to generate passive income.
Investing in an ASX stock means you own part of that company. As such, you are entitled to a share of its profits through dividend payments.
When markets and stocks fluctuate, investors receiving consistent dividend payments can offset some of this volatility with passive cash flow.
But dividend payments do not always stay the same, as they are closely tied to a company's earnings which can change year to year.
How are dividends calculated?
Typically, a company's Chief Executive Officer (CEO) proposes a dividend strategy to the board of directors, but the final decision rests with the board.
Companies often don't publicly share their dividend policies, leaving investors to rely on past dividend payments as a guide.
However, because dividends are closely tied to a company's earnings – which can vary year to year. So, it can be difficult to predict future payouts with certainty.
Although many dividend-paying companies aim to gradually increase their distributions, changes in profitability can lead to fluctuations in the amount paid.
However, there are some companies that have consistently paid over a long period of time, rarely cutting dividends.
Let's look at two.
Coles Group Ltd (ASX: COL)
Coles Group one of Australia's largest supermarket chains, has had a reliable and relatively stable dividend history since its demerger from Wesfarmers in November 2018.
The company has historically aimed to pay 80–90% of its earnings as dividends. This has given investors more reliability than many ASX 200 companies.
Since 2021, Coles has maintained stable and fully franked dividends. It has consistently paid around 61 to 66 cents per share annually, reflecting reliable performance and earnings-based discipline.
Hypothetically, if an investor bought $10,000 in Coles Group shares in 2021, this would have meant a steady dividend payout of more than $350.00 each year.
According to projections from broker UBS, Coles dividend growth is expected to continue.
The supermarket giant could deliver payout growth of approximately 15% year-over-year to 83 cents per share in FY26. According to the broker the company could surpass $1 per share by FY29.
Medibank Private Ltd (ASX: MPL)
Medibank Private is the largest health insurer in Australia.
It has been able to provide steady dividend payouts for a couple of reasons:
- As a private health insurer, Medibank benefits from a recurring income model – customers pay premiums monthly or annually.
- Health insurance demand tends to be resilient. That means even in economic downturns, giving MPL a reliable cash flow base to support dividends.
Since 2020, Medibank Private has steadily increased its fully franked dividends. They have risen from 12 to 16.6 cents per share annually.
If you invested $10,000 in Medibank at $3.00 per share in early 2021 and held onto those shares, you would have earned roughly $450-$550 in dividends each year.
