One of the best things about the Australian retirement system is the Age Pension because of how it can help households in retirement when they don't have enough financial assets to support themselves. But, there's an ASX dividend star that I'd prefer to receive income from.
The Age Pension isn't large enough to provide retirees with a luxurious life. But, receiving $1,100 per fortnight for a single person (the maximum basic rate) is a decent amount and it's certainly more generous than what many other countries pay.
But, if you gave me a choice of receiving $28,600 of annual income from the Age Pension or $28,600 from the ASX dividend star Washington H. Soul Pattison and Co. Ltd (ASX: SOL), I'd personally choose the ASX share for a few different reasons.
Before I get to those reasons, it's important to acknowledge that I wouldn't put my entire portfolio into one name. Diversification is a powerful tool and it's a good idea to spread a portfolio across a number of businesses, whether that's directly or indirectly.
But, if I did need to choose one S&P/ASX 200 Index (ASX: XJO) share for reliable retirement income, Soul Patts would be the one for me.
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Great dividend growth record
The ASX dividend star has increased its regular dividend every year since 1998. That's almost 30 years of continuous dividend growth!
While the Age Pension is rising over time, the Soul Patts dividend is rising at a much faster pace. In the FY26 half-year result, it grew its interim dividend by 9.1% year-over-year to 48 cents per share. Over the past five years, its dividend has grown at a compound annual growth rate (CAGR) of 11.9% per year.
If the FY26 annual dividend per share is increased by around 9% to approximately $1.12 per share, its annual payout would be 3.7% grossed-up dividend yield, including franking credits.
Diversification
Soul Patts operates as an investment house, meaning its asset base is spread across a wide range of industries. It has paid for its rising dividend overall over these years thanks to the investment cash flow that its portfolio produces.
I like the diversification because it reduces the risk of relying on any particular sector too much. It also means the business can look across a wide array of areas for the next investment opportunity.
Some of its larger investments come from sectors like resources, telecommunications, energy, financial services, swimming schools, agriculture water entitlements, electrification and plenty more.
By investing in so many defensive sectors that generate good cash flow, the ASX dividend star has strong support for maintaining and growing its dividend payout each year.
As time goes on, I think Soul Patts is focusing its portfolio more on assets that will be able to help the company deliver long-term growth.
How many shares to generate $28,600 of income?
I view franking credits as an important part of the company's overall passive income picture, so I'm going to include them in the calculation I'm about to do.
If someone owned 17,875 Soul Patts shares during FY26, then they could receive the same level of passive income as the Age Pension. But, I'm expecting significantly stronger income growth from the ASX dividend star than the Age Pension in the next few years.
There's a lot to like about Soul Patts shares, which is why it's my largest position, complementing other ASX dividend shares in my portfolio.
