In order to receive a dividend, you must own the ASX share before its ex-dividend date.

If you've had your eye on an ASX share for a while, and you're ready to buy, the ex-dividend date can provide a deadline to act.

Might as well buy and pick up the next dividend payment if the stock is trading at an acceptable price, right?

Alternatively, you could play a longer game, and wait for the ex-dividend date to arrive before buying the stock.

This can be a good strategy because share prices tend to fall on the ex-dividend date.

This happens because the stock is fundamentally worth less without the next dividend payment attached.

Many companies offer dividend reinvestment plans (DRPs).

DRPs allow investors to instruct the company to use their dividends to buy more shares on their behalf, instead of paying cash.

After lodging your DRP form, this process becomes automatic.

It's an easy, passive way for investors increase their shareholdings in a company over time.

And every now and then, a company will offer a discount to shareholders participating in the DRP.

Bonus!

ASX shares with ex-dividend dates next week

The post 14 ASX shares about to go ex-dividend appeared first on The Motley Fool Australia.

Over decades (in most cases), these Australian companies have built up their presence, both in our day-to-day lives, as well as in the minds of investors. We've seen growth and plenty of dividends and franking credits from all of them over the years.

But what about names such as WAM Capital Limited (ASX: WAM), Ophir High Conviction Fund (ASX: OPH), or Naos Emerging Opportunities Company Ltd (ASX: NCC)?

It's doubtful these names have the same kind of impact on any investor's psyche as the names listed above. But perhaps for an ASX dividend investor, they should. After all, CBA, Woolworths, and Telstra currently have trailing dividend yields of 3.54%, 2.39%, and 3.00% respectively.

But WAM Capital currently has 7.31% on the table. Naos is offering up 7.43%, while Ophir High Conviction Fund currently boasts a whopping yield of 13.22%.

These ASX shares certainly aren't household names in the same league as CBA or Woolies. But they certainly have something to say when it comes to dividends. So what's going on here? How can these shares offer such stupendous yields?

Why do some LICs offer such big dividend yields?

Well, it comes down to their nature. See, all of those companies are listed investment companies (LICs). That means they aren't the traditional businesses we are used to seeing on the ASX.

A LIC functions more like a managed fund than a business. It invests its capital into other investments for the benefit of its shareholders. WAM Capital, for instance, invests in a portfolio of ASX shares that WAM describes as "undervalued growth companies".

A traditional company like Telstra funds its dividends from its pool of profits. But a LIC can fund its dividend payments from two sources. It is entitled to the dividends and franking credits of its underlying holdings for one. So if a LIC like Ophir or Naos receives a dividend from a company in its portfolio, it can pass it on to its own shareholders.

But a LIC can also bank the profits it makes from buying and selling these shares. If it does so successfully, it can also use these funds to boost its dividends to its own shareholders. That is why we often see LICs like WAM Capital and Ophir with hefty trailing yields.

Of course, this doesn't always translate into massive profits for investors. For example, despite its 7.31% dividend yield right now, WAM Capital has only given a total return of 1.7% over the 12 months to 31 March (not including fees either). That compares poorly against its benchmark All Ordinaries Total Accumulation Index (ASX: XAOA), which returned 15.5% over the same period.

But food for thought, nonetheless.

The post 13%? Why some ASX LICs have such high dividend yields appeared first on The Motley Fool Australia.

Naos has three investment listed investment companies (LICs) that are looking at smaller and microcap ASX shares, including Naos Emerging Opportunities Company Ltd (ASX: NCC) and NAOS Ex-50 Opportunities Company Ltd (ASX: NAC).

These are three principles that Mr Miller talked about:

Free cashflow

The first point was that the ability of a company to compound capital comes down to how a company utilises or re-invests a portion of its free cashflow. That could be acquisitions, re-investing into new operations, starting new divisions, reducing debt or building a bigger cash pile for the future.

A business that is paying out cash at the expense of growth of the business isn't helping the long-term quality of that company.

Naos said that it likes to see capital-light businesses allocate some free cashflow to strategic and balance sheet initiatives as well as paying a dividend.

Mr Miller said that that a company that is generating sustainable income for investors should generally have a higher free cashflow than dividends.

Payout ratio

ASX listed companies have quite high dividend payout ratios compared to international shares – ASX payout ratios have been rising over the longer-term and play a factor in total shareholder returns according to Naos.

Mr Miller said that whilst there are company or industry specific, or even ownership specific, factors that may vary results, a general principle is that a very high dividend payout ratio can mean that dividends might not be sustainable over the longer-term.

When a business retains some profit, that can be a risk mitigation factor in the future if there's something like a recession.

He also pointed out that a high dividend payout ratio may mean that businesses aren't re-investing enough to stay ahead of the competition.

Mr Miller made the following comments about insights regarding boards:

A payout ratio can also provide investors with an insight into the intentions of the Board of directors. A very high payout ratio may highlight elements of a short-term focus and/or a volatile dividend profile may highlight elements of a lack of visibility around the long-term strategy of the business. As a general rule of thumb, the market doesn't look favourably on cuts in dividends amounts without appropriate justification.

In our opinion, a capable Board is one which prudently builds the retained earnings balance at a rate greater than the dividend payments but is equally able to pay a steadily growing stream of dividends over the long term. By doing so, you are giving yourself a buffer in case of unexpected losses/impairments and are able to demonstrate good level of capital management competency upon which shareholders can depend.

Financing cashflows

Mr Miller also pointed to the fact that the cashflow statement should be the first thing that investors look at because it's harder to "muddy the water".

Naos pays particularly close attention to the financing cashflow section of the balance sheet.

The investment manager doesn't like to see to businesses are regularly borrowing money without paying it back.

Sometimes a business can need to use borrowings for acquisitions or funding working capital. But a company that is living on debt and not generating free cashflow can lead to dividend cuts and a possible capital raising.

On this point, Mr Miller said:

A quick way to interpret the sustainability of the funding of dividends would be to compare dividend growth to debt growth. Artificially 'holding up' a dividend through debt is likely not a sustainable capital management decision.

Final thoughts

Mr Miller pointed out that avoiding yield traps is just as important as finding a good sustainable dividend.

He said that the compounding financial growth for a successful small company can translate into substantial dividend growth over time.

The post 3 factors for sustainable dividends from small ASX shares appeared first on The Motley Fool Australia.

One of the listed investment companies (LICs) in Naos' stable is called Naos Emerging Opportunities Company Ltd (ASX: NCC). It targets small stocks with market capitalisations under $250 million. This LIC generally invests in industrial companies.

Since the LIC's inception, its portfolio's investment performance after all operating expenses, but before fees and taxes, was 12.3% per annum to the end of February 2021.

Despite a negative impact from its holding of BTC Health Ltd (ASX: BTC), the Naos Emerging Opportunities Company investment portfolio managed to make a return of 4.3% in February 2021.

Naos attributed its good performance to the reports delivered by its holdings, including the below three which it still believes remain undervalued with catalysts that may eventuate during the rest of FY21.

Experience Co Ltd (ASX: EXP)

Experience is an adventure tourism company that offers experiences of tandem skydiving, indigenous experiences and tours to the Great Barrier Reef.

Naos said that the small ASX share released a highly commendable result with the business remaining profitable and cash flow positive in a challenging environment due to COVID-19 effects.

The fund manager has stated numerous times that it believes a significant amount of progress has been made by the current management team and that will have a positive impact on the future profitability of the business with the return of domestic tourism demand.

Initiatives by Experience include gross distribution agreements, corporate cost initiatives, new product offerings and asset base realisation. Naos believes that over the next two years, helped by small acquisitions, it can be a business that generates around $50 million of earnings before interest, tax, depreciation and amortisation (EBITDA).

Saunders International Ltd (ASX: SND)

Saunders International is a small ASX share that provides construction, maintenance and engineering services to the energy, resources and infrastructure sectors. Some of its clients include Sydney Water, the Australian Government, Lendlease Group (ASX: LLC) and Rio Tinto Limited (ASX: RIO).

Naos said that Saunders International probably released the strongest result in the Naos Emerging Opportunities Company portfolio.

The fund manager said that recent half-year results have shown losses or minimal profits. But in this report it made a "significant" profit with earnings before interest and tax (EBIT) of $4 million and declared an interim dividend for the first time in almost three years.

Saunders International managed to exceed its entire FY21 guidance in just the first six months of FY21.

The small ASX share's management has said that they don't see any slowdown in the financial performance of the business a with a new revised FY21 revenue target of $110 million to $110 million and EBIT margins of between 7% to 8%, which implies a stronger second half.

Naos believes the guidance may prove to be conservative with several industry tailwinds supporting the business for the next 12 months to three years. The fund manager said there could be opportunities that are the largest in the company's history.

The tailwinds include the federal government focus on domestic fuel storage capability, infrastructure spend with a particular focus on regional programs including bridge replacement, there are also numerous and significant opportunities within the defence sector.

Big River Industries Ltd (ASX: BRI)

Big River is involved in many different timber operations. It's a major manufacturer of softwood and hardwood formply and structural plywood products in Australia, a major seller of consumable formwork products in Australia, and it's a national merchant of timber and associated building products to local trade, medium sized and enterprise sized companies.

The timber business produced a strong result according to Naos, with EBITDA growing by 15% compared to the prior corresponding period, which wasn't affected by COVID-19.

The fund manager was excited by new information in the half-year result which Naos believes could potentially result in the small ASX share more than doubling its current annualised net profit after tax run rate of $6.2 million.

According to Naos, Big River Industries' acquisition of Timberwood remains on track with the company trading well and forecast to contribute around $3 million of net profit after tax based on the current run rate.

The net cash inflow resulting from the closure of the Wagga Wagga facility and subsequent relocation to Grafton is expected to be around $10 million with an addition to net profit of around $2.5 million. The fund manager thinks the economic backdrop could also help grow future earnings.

The post 3 exciting small ASX shares to watch after strong results appeared first on The Motley Fool Australia.

It's getting really hard to find income because of how low the official interest rate has gone. Plenty of good ASX dividend shares have seen their yields compressed as their share prices go higher.

Here are three ideas to really boost your income:

WAM Leaders Ltd (ASX: WLE)

WAM Leaders is a listed investment company (LIC) which is operated by the team at Wilson Asset Management (WAM). The lead portfolio manager is Matthew Haupt.

The idea of WAM Leaders is to provide an active approach to investing in the large caps on the ASX.

It owns some of the biggest businesses on the ASX in its portfolio like Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP), Goodman Group (ASX: GMG) and CSL Limited (ASX: CSL).

WAM Leaders also has a few 'active' picks outside of the ASX 20 in its top 20 holdings including Ramsay Health Care Limited (ASX: RHC), Challenger Ltd (ASX: CGF) and OZ Minerals Limited (ASX: OZL).

The performance of the WAM Leaders portfolio allows it to pay a steadily-growing dividend. It has a solid track record as an ASX dividend share. That's very welcome in this era of COVID-19-caused dividend cuts.

Including dividend guidance for the upcoming FY21 half-year result, it offers a grossed-up dividend yield of 8.1%.

Pacific Current Group Ltd (ASX: PAC)

This is a boutique investment business that takes strategic stakes in global asset managers to help them grow. Pacific also brings its expertise to help managers grow, if they want help, so that the manager can focus on the investments.

I think that Pacific is one of the most promising, high-yield ASX dividend shares because of how fast its earnings may grow over the next few years. In FY20 it grew its underlying earnings per share (EPS) by 18% to $0.44. That allowed the board to increase the annual FY20 dividend to $0.35 per share. A dividend payout ratio of 80% is pretty high, but completely sustainable – particularly if the earnings keep going higher.

Excluding stakes sold and acquired during the year, funds under management (FUM) grew by 52% to $93.3 billion. Pacific thinks that asset gathering efforts could improve in FY21 with new commitments.

I think that the EPS and dividend can steadily grow over the next few years. At the current Pacific share price that makes the trailing grossed-up dividend yield of 8.1%.

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This is another LIC, but it looks at the opposite end of the market to WAM Leaders. This Naos ASX dividend share targets small caps with market capitalisations under $250 million, which is the smallest end of the market.

Some examples of the shares it owns includes BTC Health Ltd (ASX: BTC), Experience Co Ltd (ASX: EXP) and Saunders International Ltd (ASX: SND).

Naos like to be long-term investors in businesses that the investment team has high-conviction in. That's why Naos generally only has around 10 names in the portfolio.

This ASX dividend share has maintained or grown its dividend every year since the second half of FY13. That means it has a pretty reliable record compared to many other dividend stocks on the ASX.

At the current Naos Emerging Opportunities Company share price it currently offers a grossed-up dividend yield of 10.1%.

Foolish takeaway

Each of these ASX dividend shares offer really good starting yields. At the current prices I think I'd definitely go for Pacific because of its global growth potential and its expected continuing growth in FY21.

The post 3 ASX dividend shares to buy with yields over 7.5% appeared first on The Motley Fool Australia.

Australia's official interest rate is now just 0.25%. That makes it really hard to generate any meaningful income from a bank account. It's hard for bank interest to even keep up with inflation at the moment.

I believe that these two ASX dividend shares could be good ways to generate more dividend income:

Pacific Current Group Ltd (ASX: PAC)

Pacific is a boutique investment business. It partners with global asset managers to help them grow. Pacific takes an equity stake and it also brings its expertise to help them grow funds under management (FUM).

One of the most important things to remember is that a dividend is going to be quite closely linked to the earnings. If the earnings are growing at a fast pace then the dividend can rise rapidly too.

In FY20, Pacific Current delivered underlying net profit after tax (NPAT) growth of 21%, rising to $25 million and underlying earnings per share (EPS) grew by 18% to $0.44. The FY20 annual dividend was grown by 40% to $0.35 per share. That represents a sustainable underlying dividend payout ratio of around 80%.

Despite COVID-19 impacts, FY20 was a strong year of growth for the ASX dividend share. Excluding stakes sold and acquired during the year, funds under management (FUM) grew by 52% to $93.3 billion. Pacific thinks that asset gathering efforts could improve in FY21 with new commitments.

Using the current Pacific share price and FY20 dividend, it has a grossed-up dividend yield of 8%. That's a good starting yield for an ASX dividend share.

However, looking ahead, the Pacific share price is trading at just 9x FY23's estimated earnings.

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This is a small listed investment company (LIC) which targets small ASX shares. Indeed, it looks for businesses with market capitalisations under $250 million.

Naos operates a strategy of only owning shares that it has high conviction in. That translates to owning around 10 names in its portfolio.

It owns some promising ASX shares in its portfolio. In its latest update for September 2020, it revealed that three examples of its core portfolio are: BTC Health Ltd (ASX: BTC), Saunders International Ltd (ASX: SND) and Experience Co Ltd (ASX: EXP).

Naos tries to invest for the long-term and it sticks to the industrial sector. The LIC ignores the index, so over the shorter-term its performance can be quite different to the index. Since inception in February 2013, its investment portfolio (after operating expenses) has outperformed the S&P/ASX Small Ordinaries Accumulation Index by an average of 5.45% per annum.

The benefit of a LIC structure is that it can generate investment returns from growth shares and then pay out a reliable and consistent dividend from those returns.

Naos Emerging Opportunities Company has increased or maintained its dividend every year since FY13. That's a good record considering its dividend yield is so large.

At the current Naos Emerging Opportunities share price it offers a trailing grossed-up dividend yield of 10.5%.

Foolish takeaway

Both of these ASX dividend shares seem like good options to grow your income in my opinion. Naos offers high-conviction diversification. There are some great companies that are valued at under $250 million.

However, my pick for income would be Pacific because of its potential growth over the next few years, which could lead to a rising share price and a growing dividend. I think it could grow its FUM strongly during FY21, particularly if COVID-19 impacts start subsiding.

The post 2 little-known ASX dividend shares to buy for income appeared first on The Motley Fool Australia.

That sounds more attractive to me than not earning anything in the bank because of low interest rates. 

What is a LIC?

A LIC is a company which invests in other assets or shares on behalf of shareholders. There are plenty of LICs on the ASX which are managing money for shareholders.

Some of them are very large and have been around for decades like Australian Foundation Investment Co.Ltd. (ASX: AFI) and Argo Investments Limited (ASX: ARG) which invest in ASX blue chips.

There are other LICs that focus on small caps and can be quite volatile like WAM Microcap Limited (ASX: WMI).

Plenty of LICs offer pretty good dividend yields, but some offer even bigger yields than most:

WAM Leaders Ltd (ASX: WLE)

WAM Leaders is a LIC operated by Wilson Asset Management (WAM). The lead portfolio manager of WAM Leaders is Matthew Haupt who has managed the portfolio of large caps over the past few years.

On the dividend side of things it has a high dividend yield of 8.1%, grossed-up, at the current WAM Leaders share price. That yield includes the forward dividend guidance of a 3.5 cents per share payment.

At 31 August 2020 the LIC's had delivered a gross return (before fees, expenses and taxes) of 10.6% per annum since May 2016, outperforming the S&P/ASX 200 Accumulation Index by 3.5% per annum. That's solid outperformance. Over the prior 12 months its gross outperformance had been 10.7%.

It's this strong level of performance (and outperformance) that allows the LIC to pay a solid dividend.

Large caps are generally seen as safer and more stable, which allows WAM Leaders to invest confidently. While many large cap ASX shares cut their dividends because of the pandemic, WAM Leaders has been able to still grow its dividend.

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This LIC has a very high dividend yield. When grossed-up, it offers a yield of 10.5% at the current Naos Emerging Opportunities share price.

It aims to invest in small cap ASX shares with market capitalisations under $250 million. Many investors don't venture into that area of the market, so there can be some exciting opportunities to be found at good prices.

Some of its current investments include Experience Co Ltd (ASX: EXP), Saunders International Ltd (ASX: SND) and Contango Asset Management Ltd (ASX: CGA).

Industrial small cap shares have found things tough in 2020 with the impacts of COVID-19. However, despite that, Naos Emerging Opportunities can still point to an average return per annum of 10.1% (after expenses but before fees) since inception in February 2013.

The high dividend yield seems fairly safe for the next few years as the LIC has maintained of grown its dividend very year since FY13. It has a profit reserve of 32.7 cents per share, which amounts to about four years at the current dividend level.

Future Generation Investment Company Ltd (ASX: FGX)

Future Generation is the final LIC in this article. It has increased its dividend each year over the past five years, including through this difficult COVID-19 pandemic period.

There are two main things to know about Future Generation. It donates 1% of its net assets to youth charities, which is particularly useful in this COVID-19 era.

Future Generation offers excellent diversification because it's invested in around 20 funds of different Australian fund managers who work for free. Each of those portfolios probably represents at least 10 holdings. So there are lots of underlying shares for good diversification. 

Future Generation has a fairly high dividend yield, it has a grossed-up yield of 6.6%.

The LIC has delivered outperformance compared to the S&P/ASX All Ordinaries Accumulation Index. Over the past three years Future Generation's gross portfolio return has beaten the index by an average of 2.1% per annum.

Foolish takeaway

All three of these LICs offer high dividend yields, which is nice for income investors. I'd be happy to buy all three at the current prices, though I think I'd prefer Future Generation because of the attractive net tangible asset (NTA) discount of around 11%.

The post 3 LICs with high dividend yields of over 6.5% appeared first on The Motley Fool Australia.

However, just because something has a seemingly big dividend yield doesn't mean it's automatically a good choice. Just look at Commonwealth Bank of Australia (ASX: CBA) – its final dividend was cut heavily and the next interim dividend could be cut too.

I don't think there are many ASX blue chips with large yields that could solid dividend payers during this period. Wesfarmers Ltd (ASX: WES) and APA Group (ASX: APA) would be two blue chips I'd be happy to rely on for income. The problem is that their starting yields aren't that high.

These ASX dividend shares have big yields and I think the dividends will grow over time:

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This business is a listed investment company (LIC) which invests in small ASX shares with market capitalisations under $250 million. This is the small end of the ASX.

One of the main benefits of LICs is that fund managers can make investment returns – largely capital gains – and then it can steadily pay out those gains as a smoothed dividend.

The Naos LIC has done very well with its dividend. It started paying a dividend in FY13 and it has grown or maintained its dividend every year since.

At the end of July 2020 the ASX dividend share offered a grossed-up dividend yield of 12.3%. At the current Naos Emerging Opportunities Company share price it's trading at a 13.5% discount to its pre-tax net tangible assets (NTA) per share. That means you can buy $1 for shares for $0.875

At the end of last month it had nine positions in its portfolio., so it's a high conviction portfolio. But it offers diversification as well.

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is a real estate investment trust (REIT) which owns agricultural farmland. Specifically, it owns berry and citrus fruit farms. At the moment all of its farms are leased to Costa Group Holdings Ltd (ASX: CGC).  

The ASX dividend share generates rental income in two ways. It receives a fixed rental income from Costa and it also has a profit share agreement – it receives 25% of the profit from the farms.

Costa's earnings have been troubled over the past couple of years because of the drought, crumbly berries and fruit flies at the citrus farms. Despite all of those issues, Vitalharvest's distribution still amounts to a 6% yield today.

If profitability per share returned to the 2019 levels then Vitalharvest's distribution yield could be 7.1%.

The ASX dividend share has recently switched managers. The new one will be looking for acquisitions to increase diversification and boost the rental profit (and the distribution). The new targets may offer a more stable income as well.

PM Capital Global Opportunities Fund Ltd (ASX: PGF)

PM Capital Global Opportunities Fund is another LIC. This one targets overseas shares.

The ASX dividend share has a current grossed-up dividend yield of 6.5%. The LIC just increased its final dividend by 25% to 2.5 cents per share. If it pays another 2.5 cents per share dividend in six months then it will have a grossed-up dividend yield of 7.25% today.

Some of the shares that it currently owns includes Visa, Siemens, Bank of America, Freeport-McMoRan, Oracle, KKR & Co and Alphabet (Google).

It has increased its dividend each year since 2016 and it could keep growing its dividend over the long-term if its investments turn out well.

At the current PM Capital Global Opportunities Fund share price it's trading at a 16.5% discount to the NTA at 7 August 2020.

Foolish takeaway

Each of these ASX dividend shares offer something different for income investors. The Naos LIC has a huge yield. Vitalharvest offers alternative income with its food-related properties. PM Capital Global Opportunities Fund has a steadily-growing dividend with good diversification.

The post 3 ASX dividend shares offering big yields appeared first on The Motley Fool Australia.

It's getting harder to find good sources of income these days. Interest rates from bank accounts are now incredibly low after the RBA cut interest rates to just 0.25%.

Business earnings are also uncertain at the moment due to COVID-19 impacts. I think there's a certain number of dividend shares that would be solid picks to boost my income, but others may not be as good as some investors expect.

Here are three dividend shares I'd go for:

Dividend share 1: Naos Emerging Opportunities Company Ltd (ASX: NCC)

The listed investment company (LIC) structure is great for investors who want income. It enables the LIC to generate investment profits from capital gains and investment income, the LIC can then pay out a smoothed dividend to shareholders.

But I only think certain LICs are worth investing in. Plenty of LICs just offer index-like returns with higher fees.

Naos Emerging Opportunities is a LIC that invests in ASX shares with market caps under $250 million. It is a good dividend share because it has maintained or grown its dividend every year since FY13. It currently has a grossed-up dividend yield of 12%.

If the LIC can continue to generate solid returns then the dividend can at least be maintained. It holds a portfolio of high-conviction shares, it only has around 10 positions. It aims to be a long-term investor with each investment choice.

Dividend share 2: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is probably my favourite dividend share on the ASX. It has increased its dividend every year since 2000. The first thing I look for with dividends is reliability. I don't think there's much point having a big dividend yield one year and then suffering a large cut one year later. Soul Patts has paid a dividend every year since its inception in 1903.

The investment conglomerate has a diversified portfolio of shares which sends a flow of quality dividends to Soul Patts each year. Some holdings include TPG Telecom Ltd (ASX: TPM), Milton Corporation Limited (ASX: MLT), Bki Investment Co Ltd (ASX: BKI) and Brickworks Limited (ASX: BKW).

The business funds its dividend from the investment income it receives, less operating expenses. In FY19 it retained around 20% of its regular net operating cash flow to re-invest into more opportunities.

The dividend share has already guided that the final FY20 dividend will be an increase on FY19's final dividend.

It's steadily making new investments to diversify the portfolio further. New investments include agriculture, retirement living and regional data centres.

Dividend share 3: WAM Leaders Ltd (ASX: WLE)

WAM Leaders is another LIC. This one is managed by the high-performing team at Wilson Asset Management (WAM). It looks to make good returns from the larger businesses on the ASX.

The dividend share has grown its dividend each year since FY17. It currently has an annualised grossed-up dividend yield of 8.7%.

Since inception in May 2016, its investment performance (before fees, expenses and taxes) has outperformed the S&P/ASX 200 Accumulation Index by 3.8% per annum. Over the past year its gross portfolio performance has been 11.4% better than the benchmark. I think that's an impressive performance from the dividend share.

Some of its top 20 holdings are similar to the ASX 20. But some holdings at the end of May 2020 were different, like Downer EDI Limited (ASX: DOW), Fortescue Metals Group Limited (ASX: FMG), OZ Minerals Limited (ASX: OZL), QBE Insurance Group Ltd (ASX: QBE), Ramsay Health Care Limited (ASX: RHC) and Santos Ltd (ASX: STO).

As a bonus, WAM Leaders is trading at a 7% discount to the 31 May 2020 net tangible assets (NTA).

Foolish takeaway

Each of these dividend shares would be really good options to boost your income. Naos clearly has the biggest dividend yield, but that doesn't leave much room for share price growth over time. Soul Patts is my preferred choice because of its low operational costs and ultra-long-term record of dividends and reliability.

The post 3 dividend shares I'd buy to boost my income appeared first on The Motley Fool Australia.

The Reserve Bank of Australia (RBA) interest rate is now very low at just 0.25%. I think ASX dividend shares are the best way to solve this income problem. But are high yield dividend shares a good idea? To answer that, I'm going to tell you about franking credits first.

Franking credits

Australia gives dividend investors a unique advantage compared to the rest of the world. The Australian taxation system generates franking credits for companies.

According to the ATO: "dividends paid to shareholders by Australian resident companies are taxed under a system known as imputation. This is where the tax the company pays is imputed, or attributed, to the shareholders. The tax paid by the company is allocated to shareholders as franking credits attached to the dividends they receive."

This is really helpful in making the high yield dividend share's yield even bigger.

For example, a large company could generate $100 of net profit. The ATO will tax it at rate of 30%. Then there's $70 left in the company's hands and $30 in tax is paid to the ATO. If the company pays out that $70 as a dividend it will attach the $30 as franking credits for the shareholder.

Franking credits can turn a fully franked dividend yield of 7% into a grossed-up dividend yield of 10%.

The pros of high yield dividend shares

Get more income from your capital 

We only have so much money at our disposal. Depending on your needs, you may want to generate a certain amount of investment income each year. High yield dividend shares could allow you to achieve the required income from a smaller capital balance. For example, a 10% grossed-up dividend yield would generate $10,000 of income from $100,000 of capital. You'd need $200,000 of capital to make $10,000 with a 5% yield.

Don't have to sell shares to be rewarded 

Some shares like Berkshire Hathaway are famous for not paying a dividend. However, if you need money to live then you'd have to sell shares to get money. I wouldn't want to be worrying about when I should be selling shares. High yield dividend shares allow you to regularly benefit from the profit they're making as they pay out those nice dividends.

The cons of high yield dividend shares

Tax

If you're earning income from your work you're probably paying tax. Dividends count as taxable income. The more you receive in dividends the more you have to pay in tax.

If you're in one of the highest tax brackets then high yield dividend shares could mean handing over a lot of your annual return over to the ATO each year.

Low re-investment

If a business makes $10 million of profit and pays out $9 million of it as a dividend then it's only retaining 10% to re-invest back into the business. It might be better for the long-term returns of the business to keep $2 million or even $5 million to re-invest.

We should want our shares to invest back into the business if it's possible to earn a decent return on that money. Dividends are important, but capital growth is also an important part of total returns.

A high yield could indicate a risky share

Some high yield dividend shares have a yield simply because they pay out most of their profit each year.

However, other shares could have a high yield because the market doesn't price the company's earnings very highly.

For example, two businesses could have the same dividend payout ratio of 50%. One could have a price/earnings (p/e) ratio of 10, which would equate to a dividend yield of 5%. The other could have a p/e ratio of 20, which would equate to a dividend yield of 2.5%.

The lower p/e business may be valued lower because it's riskier and there may be more of a chance of a dividend cut. Dividends are not safe like term deposits. We've already seen some dividend cuts in this COVID-19 era. 

Foolish takeaway

High yield dividend shares can be a good way of getting more income for your money. However, I'd only be interested in some of the more reliable dividend shares out there like WAM Research Limited (ASX: WAX), Naos Emerging Opportunities Company Ltd (ASX: NCC) and Rural Funds Group (ASX: RFF).

The post The pros and cons of investing in high yield dividend shares appeared first on The Motley Fool Australia.

You need to be careful with high dividend yields. Sometimes those shares can actually be yield traps. The dividend may be unsustainably high. It could include a one-off special dividend. The market may actually be expecting an earnings fall and therefore a dividend cut.

But if you can find great high yield ASX dividend shares, you can receive large amounts of cash dividends (and franking credits) every year for a bit less risk. Just don't expect a lot of capital growth.

Here are some ideas to think about:

Share 1: Challenger Ltd (ASX: CGF)

Challenger is the annuity king of Australia with a dominant market share. The Challenger share price has dropped almost 50% from the share price at 21 February 2020. This has pushed the trailing dividend yield to a very high level. It currently has a grossed-up dividend yield of 9.25%. That's a great yield for an ASX dividend share.

The company has reaffirmed its profit guidance for FY20, which leads me to believe the dividend can be maintained. Challenger didn't cut its dividend during the GFC. I don't think it will cut during this period either.

Over the longer-term Challenger can benefit from the ageing demographics in Australia. However, the ultra-low interest rates won't help Challenger fund the annuities if the rate stays lower for longer than expected.

Share 2: WAM Research Limited (ASX: WAX)

WAM Research is a listed investment company (LIC). The job of a LIC is to invest in shares on your behalf. One of the main benefits is that it generates profit from capital gains and investment income received. It can then pay out a smoothed dividend to shareholders.

The ASX dividend share has an annualised grossed-up dividend yield of 9.6%. That seems really good in today's low interest world.

It's invested in shares like Infomedia Limited (ASX: IFM) and Citadel Group Ltd (ASX: CGL) which look compelling at the current prices. WAM Research is trying to find these undervalued smaller growth shares.

WAM Research has grown its dividend every year since the GFC. It likes to keep a solid amount of cash on hand for protection and opportunities. However, it's likely trading at an expensive premium to the underlying net asset value.

Share 3: Naos Emerging Opportunities Company Ltd (ASX: NCC)

This is another LIC. It counts as an ASX dividend share because it has a grossed-up dividend yield of 11.8%.

Naos does things differently to most other LICs. It only looks at shares with market capitalisations under $250 million. That certainly classifies as the small cap end of the ASX.

I admire the fact that Naos only has around 10 names in the portfolio. That means it has a high conviction in what it invests in.

Small caps are much more volatile than larger shares. I believe that means we have the infrequent opportunity to buy the ASX dividend share when it's beaten up. The coronavirus has caused the share price to drop heavily, pushing the yield higher. I think the Naos LIC is a good dividend opportunity, particularly because it hasn't cut its dividend in its relatively young history.

Foolish takeaway

Each of these ASX dividend shares have great yields. At the current prices I think Challenger could produce the biggest total returns over the next few years. However, for pure income I'd go for the Naos LIC because it's not trading at an expensive premium to its net assets like WAM Research is.

The post Get paid huge amounts of cash to own these ASX dividend shares appeared first on The Motley Fool Australia.

I think having excess cash in the bank making interest at less than 1% just seems like a missed opportunity.

Before the coronavirus, wage growth was low and switching jobs seemed like the only way to get a good wage increase. These days ASX dividend shares may be the best way to boost your income.

The type of ASX shares that you could be looking at depends on how much dividend income you're trying to make and how quickly.

You need to replace your wage fairly soon

You could be at a stage in life where retirement is coming up soon. Perhaps you are in a physical job and you won't be able to do that for much longer. If this kind of situation describes you then high dividend yields could be the answer. But whatever you pick still needs to have a bit of potential growth too.

If you're at retirement age and you aren't rolling in money, you could be eligible for the pension or part pension which could help supplement your income needs.

Maybe you have $100,000 or $200,000 to invest to boost your income. The overall ASX share market is not a bad option for dividends, with a long-term investment in Vanguard Australian Shares Index ETF (ASX: VAS). The UK share market also has a solid dividend yield, which we can access through Betashares FTSE 100 ETF (ASX: F100)

There are also some listed investment companies (LICs) with big dividend yields like WAM Research Limited (ASX: WAX) and Naos Emerging Opportunities Company Ltd (ASX: NCC). Both of these LICs have grossed-up dividend yields of more than 9% and have paid reliable dividends over the past several years. They both look at smaller shares which have more growth potential than blue chips. A $100,000 portfolio with a 9% dividend yield makes $9,000 a year before accounting for income tax.

You have longer to replace your wage

You may not have an urgent need to build your income. In that case it's probably better to go for ASX dividend shares that have good yields but are still generating growth over the long-term.

ASX blue chips like Wesfarmers Ltd (ASX: WES) and Macquarie Group Ltd (ASX: MQG) have been two good options that combine dividends and growth. Real estate investment trusts (REITs) like Rural Funds Group (ASX: RFF) are also solid income options. Infrastructure shares such as APA Group (ASX: APA) can also be reliable dividend payers.

However, some of the best ASX dividend shares could be ideas that have a solid starting yield, keep growing their dividend and can make capital gains over the long-term.

I'm thinking about shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Magellan Global Trust (ASX: MGG), WAM Microcap Limited (ASX: WMI), Future Generation Investment Company Ltd (ASX: FGX) and Brickworks Limited (ASX: BKW).

Foolish takeaway

I'm aiming to replace my work earnings with dividends over time with many of the businesses I've named above. The younger you are the easier it is to plan ahead for your portfolio and benefit from compound interest. It just takes time. Plan ahead to replace your earnings. I think a monthly investment plan is a good routine. Eventually you'll reach excellent wealth and dividends.

The post How to replace your entire wage with dividends appeared first on The Motley Fool Australia.

The Reserve Bank of Australia (RBA) has pushed the official interest down to an extremely low level. How are people supposed to make an income from their assets?

Not only do savings accounts now offer a tiny interest rate, but many income shares have seen their yields compressed in the past few years (and weeks).

The difficulty is that the income is even less certain now with the ongoing global coronavirus pandemic. I think high yield ASX dividend shares could be the answer. 

With that in mind, there are some ASX dividend shares with yields above 9%:

WAM Research Limited (ASX: WAX)

WAM Research is a listed investment company (LIC) which is run by the high performing team at Wilson Asset Management.

This ASX dividend share has a grossed-up dividend yield of 9.7%. It has also grown its dividend every year since the GFC. That's an attractive combination for income. Of course, the profit reserve could run out if the LIC doesn't keep generating profits whilst paying these big dividends.

It makes money by identifying the best small and medium businesses on the ASX where there's a catalyst that could re-rate the share price. It can then fund the dividend from the investment returns.

I also like that the LIC holds a high amount of cash for protection and opportunities during times like this.

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This one is another LIC. It is another high yield ASX dividend share. It currently has a grossed-up dividend yield of 12.8%.

The Naos LIC only invests in businesses with a market capitalisation under $250 million.

Naos does things pretty differently to many other fund managers. It holds a portfolio of only around 10 high-conviction share ideas.

Over time these small cap shares can grow into much bigger businesses and also start paying dividends.

It has grown or maintained its dividend every year since it started paying one in FY13. It's building its status as a solid ASX dividend share.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue is one of Australia's largest iron ore miners. When times are good for iron ore it is able to fund very large dividends.

Before the coronavirus pandemic the iron ore price was at a good level. But things are looking pretty tough in Brazil with the spread of COVID-19. That's where Australia's main iron ore competition comes from. The iron ore price has risen even more in the past few months.

This should mean that the ASX dividend share is able to continue paying its big dividend as long as China and an upcoming court case don't derail the rosy picture.

Fortescue currently has a grossed-up dividend yield of 9.8%

Foolish takeaway

Each of these ASX dividend shares have big yields with a high chance of paying a big dividends over the next 12 months. At the current prices I'd probably go for the Naos one because its yield is the biggest and its share price hasn't grown strongly in the past couple of months.

The post 3 ASX dividend shares with big yields above 9% appeared first on The Motley Fool Australia.

In this era of very low interest rates it's more important than ever for your money to be working hard for you. High interest savings accounts aren't really paying 'high' interest any more.

ASX dividend shares give Aussie income investors an advantage. Franking credits can really boost the yield (or reduce the tax liability) for Aussies.

If you receive a fully franked $7 dividend then you'll receive $3 of franking credits attached. A normal Aussie tax payer whose only income is the fully franked $7 dividend would get a $3 tax refund when they do their tax return. It depends on your tax situation and taxable income on how much of your franking credits are refunded, or just reduce the tax liability.

How big does your portfolio need to be to make $1,000 a month in dividends?

Our work income is the most important source of earnings until we retire. It's much easier to generate work income than build up enough money to make thousands of dollars in dividends.

But compound interest and diligent saving can build up an impressive nest egg. Receiving $1,000 a month in passive income is obviously $12,000 a year. How big of a nest egg you need will depend on what you invest in and the yields those shares have. If your portfolio has a 10% dividend yield then you'd 'only' need $120,000.

There are some shares that offer that kind of yield, but not many. And they probably won't show much capital growth because the profit is largely being paid out as dividends. I'm thinking of shares like WAM Research Limited (ASX: WAX) and Naos Emerging Opportunities Company Ltd (ASX: NCC).

What about a lower yield?

If your portfolio has a 6% dividend yield you'd need $200,000. A 6% yield is still high and today's ultra-low interest rates mean there aren't many good shares left with yields above 6%. But the coronavirus sell-off has helped those yields a bit. For that type of yield I'd go for WAM Microcap Limited (ASX: WMI), Future Generation Investment Company Ltd (ASX: FGX), Brickworks Limited (ASX: BKW), Rural Funds Group (ASX: RFF) and Duxton Water Ltd (ASX: D2O). Exchange-traded funds (ETFs) like BetaShares Australia 200 ETF (ASX: A200) and Betashares FTSE 100 ETF (ASX: F100) could offer sustainable higher yields in the future at the current prices once the coronavirus pandemic is over.

If your portfolio has a 4% dividend yield you'd need a portfolio worth $300,000. This is the type of yield where you can invest for both yield and growth. I'm thinking of shares like Magellan Global Trust (ASX: MGG) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) that might be good.

The above numbers exclude the implications of income tax – every reader will have a different tax situation, but unless you need income this year it might be better to go for longer-term growth shares with lower yields.

How to reach your target portfolio size

The share market has historically produced returns of 10% per annum over the long-term. So that may be a decent number to use in any calculations. Right now it's a decent time to invest with share prices lower than earlier in the year.

If you invest $1,000 a month it would take just over seven years to reach a portfolio of $120,000 growing at 10% per annum. To reach $300,000 it would take less than 14 years.

Market-tracking investments like index exchange-traded funds (ETFs) will help you achieve what the market does. Some of the ideas in this space are iShares S&P 500 ETF (ASX: IVV) and Vanguard MSCI Index International Shares ETF (ASX: VGS).

You could try to grow your portfolio faster than the market by going for the best growth shares. I'm thinking about shares like Pushpay Holdings Ltd (ASX: PPH), Bubs Australia Ltd (ASX: BUB) and MFF Capital Investments Ltd (ASX: MFF).

The post How to make $1,000 a month in dividends appeared first on The Motley Fool Australia.

If you're trying to generate income then the RBA's official interest rate of 0.25% isn't going to do much for you unless you're just protecting capital though the coronavirus crisis.

But there are some ASX dividend shares which will handsomely reward you for owning them over the years:

WAM Research Limited (ASX: WAX) 

WAM Research has a grossed-up dividend yield of 11.1%. It has increased its dividend every year since the GFC. There are few shares that could have provided as much dividend income to investors over the past 10 years. I think it's one of the best ASX dividend shares.

It's a listed investment company (LIC) that invests in undervalued small and medium businesses. It has generated lots of profit in the past, which allows the LIC to steadily pay out a growing fully franked dividend.

One pleasing factor is that it usually holds a high cash balance for downside protection and opportunities.

Naos Emerging Opportunities Company Ltd (ASX: NCC) 

Naos Emerging Opportunities Company has a grossed-up dividend yield of 13.8%. It hasn't decreased its dividend in its fairly short existence. Recently it has been maintaining the dividend, but there was a string of increases before that. With such a high yield, just maintaining the dividend would be great from this ASX dividend share.

Naos is another LIC that invests in shares with market capitalisations under $250 million. It's finding those shares that are undiscovered to the rest of the market. It's then able to turn some of those capital gains into a solid dividend. Those small caps hopefully have a lot of growth potential.

Fortescue Metals Group Limited (ASX: FMG) 

Australian resource shares are known for being decent ASX dividend shares through the cycle. In the good times they are dividend cash machines.

As long as the China-Australia relationship remains amicable then Fortescue should be able to keep generating solid returns and paying those big dividends.

It currently offers a trailing grossed-up dividend yield of 11.5%. That's a very solid yield in the current world.

Which ASX dividend share to buy

Fortescue's yield does look attractive, but you're up for commodity risks if you go for that one. It's hard to pick a winner of the other two ASX dividend shares. WAM Research is trading at a sizeable premium to its net assets, though I like the cash position and added diversification that WAM Research's portfolio has.

The post Get paid huge amounts of cash to own these ASX dividend shares appeared first on The Motley Fool Australia.

Reason 1: Tax

Taxes are the subscription fee for being part of a good society, but you don't need to be handing over extra when you don't need to.

Unless you're in a low tax bracket (such as within superannuation or a low income earner), any dividends you receive may be taxed at around a third or even more.

If you get a sustainable 10% return from a high-yield dividend share then you could be handing over a third of it to the tax man each year. Compare that to a 10% capital growth from something like Xero Limited (ASX: XRO) or A2 Milk Company Ltd (ASX: A2M) – you don't pay any tax unless you actually sell the share. I think it makes a big difference over time.

Obviously there's the benefit of dividend franking credits which reduces your taxes owed, but you still have to make up the extra tax unless you're in that lower tax bracket position where the franking credit rate is higher than your tax rate.

Sometimes paying the tax can be worth it if you just want a high net yield from your investments and you can find a reliable dividend payer.

Reason 2: It may be a bad investment

Having a high-yield dividend share shouldn't mean you overlook all the other areas of a business. Does it have a good balance sheet? Is there good prospects for the business and its industry as a whole?

A high yield may mean little growth, which suggests the business could be mature or challenged.

If it's a bad investment then you could easily suffer wealth destruction from falling earnings and a falling share price. And the dividend could be cut. There's not much point going for the big dividend if the dividend is then cut a year or two later.

Just look what has happened to Telstra Corporation Ltd (ASX: TLS) and National Australia Bank Ltd (ASX: NAB). Lower share prices and lower dividends compared to a few years ago. Over time it's the 'growth' businesses that will keep paying larger dividends so you can receive a good yield on cost. Plenty of high yield dividend shares are actually yield traps, particularly in these coronavirus times. 

What high yield dividend shares are worth buying?

It depends how high of a yield you want to go and if you don't mind paying the elevated levels of tax.

Rural Funds Group (ASX: RFF) has a FY21 distribution yield of 5.9%.

Brickworks Limited (ASX: BKW) has a grossed-up dividend yield of 6.3%.

WAM Microcap Limited (ASX: WMI) has a grossed-up dividend yield of 7.4%.

Future Generation Investment Company Ltd (ASX: FGX) has a grossed-up dividend yield of 7.9%.

WAM Research Limited (ASX: WAX) has a grossed-up dividend yield of 10.9%.

Naos Emerging Opportunities Company Ltd (ASX: NCC) has a grossed-up dividend yield of 13.25%.

At the current prices I'd probably be happy to go for WAM Microcap, Brickworks and Future Generation as my preferred three high yield dividend share picks because the yields aren't too high. But all of them could be good long-term picks for dividends.

The post Why high yield dividend shares can be detrimental to your wealth appeared first on The Motley Fool Australia.

Just think about the ASX banks like National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC). All of them have been income disappointments recently.

The coronavirus has really boosted some dividend yields.

Here are three ASX shares with dividend yields above 10%

WAM Research Limited (ASX: WAX) 

This is a listed investment company (LIC) which invests in promising small and medium ASX shares. It has been a top performer for shareholders since the GFC, growing its dividend every year in that time.

WAM Research likes to keep an attractive amount of cash on hand for protection and opportunities. At the end of March 2020 it was invested in a number of defensive businesses that could rebound like Bapcor Ltd (ASX: BAP), Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPM) and Breville Group Ltd (ASX: BRG).

It currently has an annualised grossed-up dividend yield of 11.8%.

Commonwealth Bank of Australia (ASX: CBA) 

CBA was the only major bank not to announce an income cut for shareholders in FY19. That includes ANZ reducing the franking credit percentage.

Using the trailing dividends, it offers a grossed-up dividend yield of 10.3%.

I think CBA will likely be the major ASX bank share to cut its dividend by the smallest percentage because of its quality and reliable balance sheet.

But I do think that a dividend cut is coming, particularly because of directions by APRA and the Reserve Bank of New Zealand (RBNZ).

Naos Emerging Opportunities Company Ltd (ASX: NCC) 

This is another LIC, it looks at ASX shares with market capitalisations under $250 million, which means it's not competing with many other investors and there's plenty of room for growth.

It has maintained its dividend for the last couple of years, but it hasn't cut the dividend since it started paying a dividend several years ago. It currently offers a trailing grossed-up dividend yield of 13.4%.

As at 31 March 2020, the LIC still has the profit reserves to be able to keep paying dividends. 

Some of its holdings include shares like BSA Limited (ASX: BSA) and Experience Co Ltd (ASX: EXP).

Foolish takeaway

I think a dividend cut is quite likely from CBA this year, so its yield could be a trap too. But both Naos and WAM Research could offer continued reliable dividends. Out of the two I'd go for Naos because it's trading at a better price compared to its net tangible assets (NTA).

The post 3 ASX shares with dividend yields above 10% appeared first on The Motley Fool Australia.

It's particularly ASX shares that have good income advantages due to the franking credits which refunds tax paid by Australian companies to Aussie taxpayers as a tax credit, which then increases the dividend yield on offer.

How much do you need to make $1,000 a month in dividends from shares?

The money we earn from work is the most important source of earnings until we retire. It is a lot easier to earn money from work than it is to build up enough money to make thousands of dollars a year in dividends.

However, diligent saving and the power of compound interest can grow into a large nest egg. If you want to receive $1,000 a month then that obviously means $12,000 a year.

The necessary size of your nest egg will depend on what you invest in and the yields of those dividend shares. For example, if your portfolio had a 10% dividend yield then you'd 'only' need a portfolio worth $120,000. But, dividend shares with high yields are riskier and/or probably won't increase their dividend much over time.

Let's go for a bit of a lower yield.

If your portfolio had a 6% dividend yield you'd need a $200,000 portfolio. A 6% yield is still pretty high, particularly with how low Australian interest rates are. Today's extremely-low interest rates mean there aren't that many good dividend shares left with yields above 6%.

If your portfolio had a 4% dividend yield you'd need a portfolio worth $300,000.

Don't forget, the above numbers exclude the effects of tax – every reader will have a different tax situation, but unless you need income it might be unwise to choose very high dividend yields because you may be giving some of your returns to the tax man for no real benefit.

How to grow a portfolio worth $120,000 to $300,000

Historically, the share market has produced returns of 10% per year over the long-term. So using 10% would be a decent number to calculate any return numbers, although returns could be a little lower in the future from today's current market prices.

If you invest $1,000 a month it would take just over seven years to reach a portfolio of $120,000 growing at 10% per year. To reach $300,000 it would take less than 14 years. Notice how the power of compound interest causes $180,000 to be added in the second period of seven years, but $120,000 is added in the first seven years.

Market-tracking investments like index exchange-traded funds (ETFs) will help you achieve what the market does. Some of the ideas in this space are iShares S&P 500 ETF (ASX: IVV), Vanguard MSCI Index International Shares ETF (ASX: VGS) and BetaShares Australia 200 ETF (ASX: A200).

But, if you choose to invest in the best growth shares you could reach your desired portfolio balance even quicker. I think some of the best ideas right now are Altium Limited (ASX: ALU), MFF Capital Investments Ltd (ASX: MFF), Pushpay Holdings Ltd (ASX: PPH) and Webjet Limited (ASX: WEB).

Which shares would be good for dividend yields?

Depending on the yield you're looking for, here are some various ideas which have sustained or growing dividends:

Naos Emerging Opportunities Company Ltd (ASX: NCC) has a grossed-up dividend of 9.8%.

WAM Research Limited (ASX: WAX) has a grossed-up dividend of 9.9%.

WAM Leaders Ltd (ASX: WLE) has a grossed-up dividend yield of 8%.

Future Generation Investment Company Ltd (ASX: FGX) has a grossed-up dividend yield of 6.7%.

Rural Funds Group (ASX: RFF) has a distribution yield of 5.4%.

Brickworks Limited (ASX: BKW) has a grossed-up dividend yield of 4.9%.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has a grossed-up dividend yield of 4.25%.

The post How to generate $1,000 a month in dividends from shares appeared first on The Motley Fool Australia.

Sounds a bit difficult doesn't it? How can a business grow at a fast pace whilst also having a high dividend yield? You could get very lucky and recognise a fast-growing business which has a high yield before the market bids it up such as Magellan Financial Group Ltd (ASX: MFG) and Dicker Data Ltd (ASX: DDR).

But I think there are two methods that are easier to identify.

Growth shares that are paying dividends

My best investment by far has been Altium Limited (ASX: ALU). I'm not about to say Altium has a high dividend yield today, but I'm now getting a double-digit dividend yield on my purchase price thanks to the decent starting yield and fast dividend growth. 

New investors in growth shares won't get a huge yield, but after a few years it can compound into much larger yields.

Various businesses have increased their dividend payment enormously over several years. Examples include Domino's Pizza Enterprises Ltd. (ASX: DMP), REA Group Limited (ASX: REA), CSL Limited (ASX: CSL), Bapcor Ltd (ASX: BAP), Service Stream Limited (ASX: SSM) and so on.

It's quite hard to find good value growth shares that have a solid starting yield these days due to the low interest rates.

Looking out five years, I think the share with the best chance of growing the yield to double digits is Webjet Limited (ASX: WEB). In my opinion, other growth candidates which pay dividends and could pay a 10% yield in five or so years are: Citadel Group Ltd (ASX: CGL), Duxton Water Ltd (ASX: D2O) and Kogan.Com Ltd (ASX: KGN).

Listed investment companies (LICs)

The benefit of operating as a company means that an investment manager can turn capital gains into steadily growing dividends for shareholders assuming they make enough profit to fund those dividends.

The LIC can do the investing in growth shares and then you, the shareholder, get to receive most of the profit in the form of a high dividend. It can be unsustainable if LICs pay out dividends that are too big, but there are a few that have found the right balance (so far).

Some examples include:

WAM Research Limited (ASX: WAX) has a grossed-up dividend yield of 9.8%.

Naos Emerging Opportunities Company Ltd (ASX: NCC) has a grossed-up dividend yield of 10.3%.

Future Generation Investment Company Ltd (ASX: FGX) has a grossed-up dividend yield of 6.5%.

Foolish takeaway

Investing in LICs is easier and more of a passive approach because you're letting investment managers do the work for you. However, picking the right growth shares will lead to better compound total returns, particularly when you consider the negative effect of fees and taxes (both corporate tax for the LIC and income taxes for the individuals) that arise from LICs.

The post How to get a large dividend yield from ASX growth shares appeared first on The Motley Fool Australia.

But I believe we're being presented with better priced opportunities. Shares have been expensive recently because of low interest rates. Now they're less expensive. 

One of the benefits of a lower share price is that it boosts the prospective dividend yield, assuming the dividend isn't cut.

These dividend shares now have a dividend yield of 10% or more:

Naos Emerging Opportunities Company Ltd (ASX: NCC) 

The small cap focused listed investment company (LIC) looks at shares with market capitalisations under $250 million. It likes to have a high-conviction portfolio of only around 10 names.

In times like this it's small caps that have been hurt the most. Since Monday the Naos share price has dropped 10%. This has boosted the trailing grossed-up dividend yield to 10.4%.

Since it started paying a dividend in the second half of FY13 it has grown its dividend each year to FY18 and has maintained the dividend since.

The LIC is able to turn capital gains and dividends received into dividends for its own shareholders, though an absolute share crash could deplete the LIC's profit reserve.

WAM Research Limited (ASX: WAX) 

This is another LIC, so it has the same ability to pay dividends from its investment returns. Over the past decade WAM Research has been one of the best-performing LICs with a focus on smaller shares with a lot of growth potential. Geoff Wilson and the Wilson Asset Management (WAM) investment team have performed very well. 

WAM Research has seen its share price fall around 10% this week. This has pushed its grossed-up dividend yield to 10%.

It has grown its dividend every year since GFC and the previous strong investment returns will hopefully keep slowly growing the dividend.

Foolish takeaway

Both of these businesses now offer very large dividend yields thanks to today's market fall. High yield isn't my main aim, so I'm not looking to these two LICs today. But for brave income-seekers it could be a good time to be opportunistic.

The post Coronavirus correction boosts these ASX dividend yields to over 10% appeared first on The Motley Fool Australia.