Where to invest $20,000 in ASX dividend shares for passive income

These three businesses would be high on my list if I wanted to increase my portfolio income.

Passive income is one of the big attractions of investing in ASX dividend shares.

If I had $20,000 available and wanted to increase the income coming from my portfolio, I would be looking for businesses that can support their dividends with dependable earnings and cash flow.

These are three ASX dividend shares I would consider today.

Happy young woman saving money in a piggy bank.

Image source: Getty Images

Telstra Group Ltd (ASX: TLS)

Telstra would be high on my list. The telecommunications giant provides services that millions of Australians use every day, which gives the business a relatively defensive earnings base.

That is a good starting point for a passive income investment. I want to have some confidence that the underlying business can keep generating the cash required to support its dividend through different economic conditions.

Telstra lifted its dividend to 21 cents per share in FY26, and expectations point to another modest increase to 22 cents in FY27. This represents a 4.6% dividend yield at current prices.

Another thing I like is its growth outlook. Telstra's longer-term strategy is targeting continued earnings growth through to FY30, which could give the company more capacity to lift dividends over time if it delivers on those ambitions.

For me, that combination makes Telstra one of the ASX dividend shares I would be most comfortable owning for the long term.

APA Group (ASX: APA)

APA would provide a different type of income exposure.

The company owns a large portfolio of energy infrastructure, including gas pipelines, electricity transmission assets, and power generation infrastructure.

I like the nature of those assets for an income investment because much of APA's revenue comes from regulated arrangements or long-term contracts.

That can provide greater visibility over future cash flows, which in turn helps support distributions to shareholders.

APA is also continuing to invest in its infrastructure network as Australia's energy system evolves.

For income investors, I think that creates a nice balance. There is an established portfolio generating cash today, while new projects could support growth in the years ahead.

Harvey Norman Holdings Ltd (ASX: HVN)

Harvey Norman is my third pick.

The retailer operates across furniture, electronics, appliances, and other household categories, while its business also includes a substantial property portfolio.

I like the company for its strong financial position and the cash its operations can generate when trading conditions are supportive.

Harvey Norman has also demonstrated a willingness to return a meaningful portion of its profits to shareholders through dividends.

It is important to remember that retail earnings will naturally move with consumer spending, so I would expect more income variability here than I would from a telecommunications or infrastructure business.

But that cyclicality can also create opportunities to buy the shares at attractive prices when sentiment towards the consumer sector is weak.

I think that is the case now, with Harvey Norman shares trading close to their 52-week low and offering a forecast dividend yield of 7.1%.

Foolish takeaway

For me, passive income works best when the dividend is a result of a healthy business.

That is what I like about these three ASX dividend shares. Each has an established earnings base and a credible path to keep rewarding shareholders over time.

If I had $20,000 to put to work for income, I would be happy to start my search here.

Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Apa Group, Harvey Norman, and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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