There are some really good ASX dividend shares out there rated as buys by experts, including telco Telstra Corporation Ltd (ASX:TLS).
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There are some ASX dividend shares that have been chosen by an expert stock picker as ideas for income.
Paul Rickard is one of the leading figures at Switzer Financial Group, and he recently shared some of his favourite income picks that aren’t miners or banks. Mr Rickard’s idea of a good ASX dividend share is one that’s quite boring, reliable, and importantly – has relatively stable capital. That means it won’t go up or down in price much.
These are the four ideas that he named:
Charter Hall Long WALE REIT (ASX: CLW)
As the name suggests, this is a real estate investment trust (REIT) which is focused on finding quality properties and quality tenants, and maintaining a long-term weighted average lease expiry (WALE). The WALE is around 14 years, which is one of the longest in the sector.
Mr Rickard pointed out the diversification of the REIT. It’s invested in a variety of sectors including industrial and logistics, retail, office, telco exchanges and agri-logistics.
The REIT’s 100% distribution payout ratio means that it has a high yield. In FY21 it’s expecting to generate operating earnings per share (EPS) of at least 29.1 cents, which is growing of at least 2.8% and translates to a distribution yield of at least 6%.
APA Group (ASX: APA)
APA owns and operates $22 billion of energy infrastructure assets, including a huge gas pipeline network around the country, as well as pipelines that connect to 1.4 million gas consumers. It also owns various other energy assets.
Mr Rickard pointed out that “approximately 89% of APA’s revenue is ‘take or pay’ being either capacity charge revenue, regulated revenue or contracted fixed revenue. This means it is relatively fixed and not subject to short term variable demand.”
The nature of APA’s business, assets and customers means that the business has a lot of visibility for its financial expectations.
The ASX dividend share is expecting to pay a distribution of 51 cents per unit, which equates to a distribution yield of 5.1%.
Mr Rickard likes the low risk nature and stable cashflows of the business.
Medibank Private Limited (ASX: MPL)
Australia’s largest private health insurance business is the third pick of the financial commentator.
He noted that it keeps increasing its total policyholder count as well as its market share. It has done well to offset the difficulties of participation and affordability. There are areas of growth that the company is pursuing like in-home care, health and wellbeing services, and telehealth ancillary services.
Although the CEO will soon be departing, there are positives for the ASX dividend share – like the strong profit growth of both its investment income profit and the health insurance operating profit.
However, claims are expected to rise in the second half of FY21 as the COVID-19 effects on private health activities subsides, and volumes return. But the company is also expecting more efficiency improvements.
Using the numbers that Mr Rickard shared about the expected Medibank FY21 dividend, it has a forward grossed-up dividend yield of 5.8%.
Telstra Corporation Ltd (ASX: TLS)
The telco was the final pick by Mr Rickard, he thinks that Telstra can generate a little bit of share price growth, perhaps up to $3.75 over time. The demand for income, and the sale of TowerCo, could provide a floor for the Telstra share price.
For the foreseeable future, the dividend is expected to be $0.16 per share.
That means that the Telstra share price could offer a grossed-up dividend yield of 6.6% for the next couple of years.
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Returns As of 15th February 2021
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of APA Group, COLESGROUP DEF SET, and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.