2 defensive ASX dividend shares for income

In this article are 2 defensive ASX shares that pay reliable income. One of the stocks is Magellan Infrastructure Fund (ASX:MICH).
The post 2 defensive ASX dividend shares for income appeared first on Motley Fool Australia. –


In this article are two defensive ASX dividend shares that pay reliable income.

The Reserve Bank of Australia (RBA) decided this week to maintain the official interest at just 0.10%.

Here are two ASX dividend shares that pay reliable income to shareholders:

Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT).

It owns a diversified portfolio of farming assets. The ASX dividend share has cattle farms, vineyards, almond farms, macadamia farms and cropping properties (sugar and cotton). It currently has 61 properties.

The properties are spread across different states and climactic conditions to add additional diversification to its real estate portfolio.

Most of Rural Funds’ tenants are large and listed entities. Some of its tenants include Treasury Wine Estates Ltd (ASX: TWE), Select Harvests Limited (ASX: SHV), Olam, JBS and Australian Agricultural Company Ltd (ASX: AAC).

Most of these tenants are on long-term leases, particularly the almond farms. Rural Farms has a weighted average lease expiry (WALE) of around 11 years at 30 June 2020. It had a gearing ratio of 29.7% at the end of FY20. 

The ASX dividend share aims to increase its distribution by at least 4% per annum. It has achieved this each year over the past several years since it listed.

Rural Funds has rental increases built into its rental agreements. One large group of rental agreements has a fixed 2.5% increase each year. Its other group of rental agreements have increases linked to CPI inflation. Some of those contracts have market reviews with them.

Rural Funds has been investing in productivity improvements at its farms, particularly the cattle properties, to boost the rental income and value of the farm.

For FY21 the ASX dividend share has provided distribution guidance of 11.28 cents per unit, this equates to a forward distribution yield of 4.4%. The FY21 adjusted funds from operations (AFFO) per unit, which essentially measures the cash net rental profit, is expected to come in at 11.7 cents.

Magellan Infrastructure Fund (ASX: MICH)

This is an exchange-traded fund (ETF) which gives investors exposure to infrastructure businesses around the world.

To be considered to make it into the portfolio, the underlying business must provide a service that is essential to the efficient functioning of a community, while generating cash flows that are not subject to external risks such as commodity prices.

On top of that, the ASX dividend share looks at other risks like gearing levels, sovereign risk, regulatory risk and reporting transparency. The businesses that remain should have reliable demand and generate predictable cash flows according to the infrastructure investor.

At the end of October 2020 its biggest holdings were (in alphabetical order): American Water Works, Atmos Energy Corporation, Crown Castle International Enbridge, Eversource Energy, Red Electrica Corporacion, Sempra Energy, Transurban Group (ASX: TCL), Vopak and Xcel Energy.

The COVID-19 decline has caused the net return over the past four years to drop to 5.5% per annum, though that it is still 4.2% higher than the benchmark, being the S&P Global Infrastructure Net Total Return Index. Whilst those figures include the fees, it must be stated that the annual management fee is 1.05% per annum.

Around 42% of this fund is invested in USA assets, with another 22% in Europe and 17% in the Asia Pacific region. The rest of the assets, apart from a 10% cash position, is invested in the UK, Latin America and Canada.

Based on the current Magellan Infrastructure Fund share price, it offers a trailing distribution yield of 4.1%.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia’s Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a ‘must consider’ for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don’t miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Click Here For Your Free Stock Report

Returns As of 6th October 2020

More reading

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Treasury Wine Estates Limited. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Magellan Infrastructure Fund. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 2 defensive ASX dividend shares for income appeared first on Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!