ASX dividend shares that offer defensive and reliable earnings could be a smart call at a time when the outlook is uncertain in relation to inflation, AI outcomes and so on.
If an ASX dividend share can provide investors with a pleasing and rising payout, as well as long-term earnings growth, then it could generate pleasing total shareholder returns.
At the current valuations, I think the two names below can outperform the S&P/ASX 200 Index (ASX: XJO) over the medium term.
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Sonic Healthcare Ltd (ASX: SHL)
Sonic Healthcare has an impressive market share in the pathology sector with a presence in countries like Australia, Germany, the US, the UK, Switzerland and other markets.
It provides a very valuable service to the population of those countries, which I'd describe as very defensive because there's a certain level of demand each year – everyone gets sick sometimes.
Sonic Healthcare is investing in technology to help provide the next level of pathology services, with AI potentially assisting the company to be more efficient (in terms of costs) and also deliver a better outcome for patients.
Not only is the company naturally benefiting from ageing and growing populations, but it also occasionally makes acquisitions to boost its scale and geographic exposure.
The ASX dividend share has increased its payout in most years over the past three decades and the company's leadership wants to continue the progressive dividend policy.
Excluding franking credits, its FY25 payout translates into a dividend yield of around 4.75%. I think the FY26 payout will be larger and the business looks a lot cheaper after falling close to 20% over the past year.
Charter Hall Long WALE REIT (ASX: CLW)
Commercial rental properties can provide investors with defensive operating earnings thanks to the resilient tenants that are utilising those buildings.
One of the most pleasing things about this real estate investment trust (REIT) is that it has a long weighted average lease expiry (WALE) of around nine years – the tenants are signed on to pay rental income for the long-term.
Not only is the rental income reliable, but it's also growing, with the contracts having annual rental income growth linked to inflation or they have fixed increases.
The portfolio of properties is diversified across a number of sectors including hotels, service stations, industrial and logistics, office, data centres and social infrastructure. This helps protect against sector risk and allows the business to search for the best opportunities.
Charter Hall Long WALE REIT expects to hike its FY26 payout to 25.5 cents per security, translating into a forward distribution yield of 6.25%. The ASX dividend share has dropped 12% since September, shown above, providing a sizeable boost to the yield on offer and making the valuation more appealing.
