Investing in ASX blue-chip shares is a very effective strategy for finding strong businesses. There are a couple of S&P/ASX 20 Index (ASX: XTL) dividend giants I believe will be paying dividends in many years from now.
Banking is a very competitive industry, while mining can produce variable profits (and dividends) for shareholders. They are not the target areas I want to look for ideas because I'm not confident about how regularly the businesses will deliver pleasing dividend growth.
Instead, there are other names within the ASX 20 that appeal to me for passive income for a few different reasons.
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Wesfarmers Ltd (ASX: WES)
Wesfarmers is one of Australia's biggest retailers, with names like Kmart, Bunnings, Officeworks and Target already in its portfolio.
The company has already been operating for many decades – it has proven its longevity. I think it's going to be around for decades longer for a few different reasons.
Firstly, I believe customers will always want good value products with the scale of Kmart and Bunnings giving Wesfarmers significant advantages compared to smaller competitors. I think the two big earnings generators still have a lot of growth potential as they expand their product ranges, unlocking larger total addressable markets (TAM).
I think Kmart's Anko products have enormous potential in the coming years and decades if it's able to execute on the potential to grow sales internationally. Its first international stores are open in the Philippines, while certain products are being sold into North American markets.
Wesfarmers is already one of the oldest businesses on the ASX and its ability to change its investments makes me believe it can adjust its company to find the best opportunities, or at least unlock new growth avenues. In recent times, it has expanded into industries like healthcare and lithium mining, which are two sectors with exciting long-term potential.
Some of the ASX 20 dividend giant's future best businesses may not even be in its portfolio yet.
In the FY25 result, Wesfarmers' board decided to increase its annual dividend per share by 4% to $2.06. At the time of writing, this translates into a grossed-up dividend yield of just over 3%, including franking credits.
Telstra Group Ltd (ASX: TLS)
Telstra is the other business I want to highlight, it's Australia's leading telecommunications business as measured by subscriber numbers and network coverage.
Telecommunications has been an important part of Australian life for decades. The country is becoming increasingly technological and I think Telstra's role will be even more important as households, businesses and other organisations use the internet. I think that dynamic is only going to increase further in the coming decades.
Telstra is already the market leader in Australia and I don't think that's going to change in the foreseeable future. The telco continues to invest in its 5G network, ensuring it stays ahead of competitors. It's already starting to work on 6G and I believe the ASX 20 dividend giant will be able to grow profit and its dividend in the coming decades as it invests in new technologies and ensures a growing number of devices can access the internet.
In the FY25 result, Telstra's board of directors hiked its annual dividend per share by 5.6% to 19 cents. That translates into a grossed-up dividend yield of 5.5%, including franking credits, at the time of writing.
