One of the best ways to use ASX shares, in my view, is to build a second income thanks to the generosity of ASX companies that want to send dividends to shareholders and unlock the bonus of franking credits.
If I were investing for a second income, I'd want to choose ASX shares that seem as dependable as job earnings and also regularly increase their payouts.
I'd like to highlight two ASX shares that I think are great options for a second income (or retirement income).
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WCM Global Growth Ltd (ASX: WQG)
This is a listed investment company (LIC) – the job of a LIC is to invest in other shares on behalf of shareholders. The fund manager of this LIC is WCM, which is based in Laguna Beach, California.
One of the first advantages of this LIC is that it gives investors exposure to a portfolio of global shares, which is appealing to get exposure to different opportunities around the world, not just the typical ones on the ASX.
WCM wants to find great businesses with expanding economic moats (improving competitive advantages) and a company culture that fosters the expansion of those advantages.
When it comes generating a second income, the LIC has a great track record of delivering dividends and payout growth.
It has increased its annual dividend each year since 2019 and fairly recently changed to paying its dividend quarterly.
The business has guided that it's going to increase its quarterly dividend each quarter between now and March 2027. The quarterly dividend that's expected to be paid in March 2072 is 2.45 cents per share, which translates into a grossed-up dividend yield of close to 8%, including franking credits, at the time of writing.
As a bonus, it's likely trading at a discount to its net tangible assets (NTA) – that's the underlying value of each share.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
The other ASX share I want to highlight for unlocking a second income is Soul Patts, one of the oldest companies on the ASX.
It was listed more than 120 years ago and it has paid a dividend every year in that time, including through wars, global pandemics and economic recessions.
The business is an investment conglomerate that started as a pharmacy business and now has a diversified portfolio across numerous areas.
Its investments include resources, telecommunications, energy, industrial property, swimming schools, agriculture, water entitlements, electrification, financial services, retail, healthcare, retirement living, credit and building products.
The company is a great option for a second income because of how consistently it increases its payout.
Soul Patts has increased its regular annual dividend per share every year since 1998, which is the longest growth streak on the ASX. I think the dividends are likely to continue growing because the business is committed to doing so, its dividend payout ratio is usually at a very healthy level each year and it's regular investing in new opportunities.
Its latest two half-year dividends come to a grossed-up dividend yield of 3.5%, including franking credits, at the time of writing.
