3 top ASX dividend shares to buy

This article is about 3 ASX dividend shares that are paying solid income payments to investors including Service Stream Limited (ASX:SSM).
The post 3 top ASX dividend shares to buy appeared first on The Motley Fool Australia. –

safe dividends

There are some ASX dividend shares that have a history of paying attractive income payments to shareholders.

The Reserve Bank of Australia (RBA) official interest rate is now down to a low of just 0.1%.

Here are three examples of shares with a reputation for paying dividends:

Transurban Group (ASX: TCL)

Transurban is one of the world’s biggest toll road businesses. According to the ASX, it has a market capitalisation of $38 billion. At the end of September 2020, Transurban was Magellan Infrastructure Fund’s (ASX: MICH) largest position in its portfolio.

Before COVID-19 came along, it was steadily increasing its distribution every year. But then the pandemic significantly reduced traffic for a period of time whilst people worked and learned from home.

In the quarter ending 30 September 2020, Transurban said that its average daily traffic (ADT) was down by 25.2%. Volumes were down at the group level, but there had been continuing improvement in Brisbane, Sydney, the Greater Washington Area and Montreal. Melbourne was where most of the decline was, with Melbourne ADT down 58.6%. However, Melbourne restrictions have now been lifted.

The FY21 distribution by the ASX dividend share is anticipated to be in line with free cash excluding capital releases. The Commsec forecast distribution for Transurban in FY21 is expected to be around 38 cents per unit, equating to a distribution yield of 2.7%. FY22 is expected to have a distribution of 49.5 cents per unit, representing a forward yield of 3.5%.

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) which specialises in owning and leasing out agricultural properties. According to the ASX, it has a market capitalisation of $837 million.

It has a diversified portfolio of properties across different sectors including cattle, vineyards, almonds, macadamias and cropping (sugar and cotton). Its properties are also spread across different climates and states to add diversification.

Rural Funds owns a large amount of water entitlements for its tenants to use, which is helpful during times of low rainfall.

The REIT has rental growth built into all of its contracts. That growth is linked to either a fixed 2.5% increase per year or CPI inflation, plus market reviews. Rural Funds also retains some of its annual rental cash profit to invest into improvements at its farms which can boost the rental income and farm value.

The ASX dividend share aims to increase its distribution by at least 4% per year. It’s aiming to grow its distribution to 11.28 cents per unit in FY21, which equates to a forward distribution yield of 4.6%.

Service Stream Limited (ASX: SSM)

Service Stream is a business that’s involved in essential network services to the telecommunications and utility sectors. It’s involved in the design, construction, operation and maintenance of service networks.

According to the ASX, Service Stream has a market capitalisation of $979 million.

Service Stream has just announced that it has secured a “significant” long-term agreement with the NBN Co for the provision of service activations, operations and maintenance of the NBN.

The agreement is for an initial period of four years, with two two-year extension options. The deal will replace the existing operations and maintenance master agreement (MMA) that had been going since December 2015.

Under the Unify Services’ regional allocation model, NBN has allocated Service Stream the regions of Queensland, South Australia, Northern Territory and Western Australia, with additional regions able to be allocated at the NBN’s discretion. Unify Services is expected to generate approximately $70 million of revenue for the group in its first year, with subsequent years depending on annual work volumes.

In FY20 Service Stream maintained its dividend at 9 cents per share, which equates to a trailing grossed-up dividend yield of 5.3%.

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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Service Stream Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 3 top ASX dividend shares to buy appeared first on The Motley Fool Australia.

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