Insights

2 ASX dividend shares that could provide steady income in retirement

Rural Funds and Brickworks are two businesses that could pay steady dividends.
The post 2 ASX dividend shares that could provide steady income in retirement appeared first on The Motley Fool Australia. –

There are a group of high-quality ASX dividend shares that may be options for investors to consider for consistent investment income.

In an uncertain world, it could be a good idea to think about businesses that are seemingly capable of still paying a dividend.

Here are two ASX dividend shares that may be candidates:

Rural Funds Group (ASX: RFF)

Rural Funds is a leading real estate investment trust (REIT) which specialises in owning a portfolio of quality farms around Australia.

It owns several different farm types including almonds, cattle, vineyards, macadamias and cropping (sugar and cotton).

The farm landlord has a number of major tenants signed up on long-term contracts, giving clear rental income visibility. Some of those tenants include JBS, Olam, Select Harvests Limited (ASX: SHV) and Treasury Wine Estates Ltd (ASX: TWE).

One of the main aims of Rural Funds is grow the distribution for investors by 4% per annum. It has achieved this goal since it listed several years ago and started paying a distribution.

It achieves this distribution through two organic methods. One way is that it regularly invests in its farms either to make them more productive for tenants, or change the farm type to a better/more profitable use.

The other ‘organic’ way Rural Funds achieves distribution growth is thanks to the rental increases that are built into the rental contracts. That rental indexation is either a fixed 2.5% annual increase, or linked to CPI inflation, with some contracts containing market reviews.

Based on the FY22 distribution guidance of 11.73 cents per unit, that equates to a forward distribution yield of around 4.5% for the ASX dividend share.

Brickworks Limited (ASX: BKW)

Brickworks is a business that has had one of the most consistent dividends over the last few decades.

It hasn’t cut its dividend in over 40 years. Brickworks says that it’s proud of its long history of dividend growth and the stability it provides to shareholders. Indeed, it has maintained or increased its dividend every year for 45 years.

Brickworks points to its 39.4% stake in the investment company Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) as an important contributor. Soul Patts, according to Brickworks, has a track record of delivering outperformance during difficult market periods. This was seen during the year to 31 January 2021, where Soul Patts’ return was 29.5% and the ASX All Ordinaries Accumulation Index return was a return of negative 0.7%.

With its portfolio of assets like telecommunications, IT, financial services, mining, energy and pharmaceuticals, Soul Patts is expected to continue to deliver a stable and growing stream of earnings and dividends over the long-term.

Whilst the current COVID-19 outbreak is hurting the ASX dividend share’s Australian building products production, it is hopeful about the long-term potential of its joint venture industrial property trust.

Regarding that trust, Brickworks says there is a trend towards online shopping, and demand for more sophisticated facilities to drive growth. The completion of pre-committed facilities over the next two years will result in a significant uplift in rental income and asset value, according to Brickworks.

At the current Brickworks share price, it has a grossed-up dividend yield of 3.5%.

The post 2 ASX dividend shares that could provide steady income in retirement appeared first on The Motley Fool Australia.

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Returns As of 15th February 2021

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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, Treasury Wine Estates Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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