I think that you beat low interest rates with income from ASX dividend shares like LIC Australian United Investment Company Ltd (ASX:AUI).
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I believe there are a number of interesting ASX dividend shares that could be good picks to buy for income to beat the very low interest rate.
The RBA doesn’t have many options of what it can do to assist the economy. I understand why the interest rate has been pushed as low as it has. However, it has made it really hard to generate any income for savers. ASX dividend shares like these might be the answer to the problem:
Pacific Current Group Ltd (ASX: PAC)
I think that Pacific looks like a really good dividend option at the moment. The company describes itself as a global multi-boutique asset management business committed to partnering with exceptional investment managers.
The idea is to invest in investment managers, help them grow with Pacific’s expertise and generate good long-term growth.
Some of Pacific’s investments performed very well in FY20. Asset manager GQG grew its own funds under management (FUM) from US$25.1 billion to US$44.6 billion in just one year. Excluding boutiques sold and acquired during the year, Pacific’s FUM grew by 52% to $93.3 billion.
It was this strength of the FUM that helped it grow its underlying earnings per share (EPS) by 18% to $0.44 which helped the FY20 annual dividend grow by 40% to $0.35 per share. That’s strong growth for an ASX dividend share.
At the current Pacific share price it offers a grossed-up dividend yield of 7.9%. I think
WAM Leaders Ltd (ASX: WLE)
This is a listed investment company (LIC) which targets the larger shares on the ASX. It’s very capably run by the team at Wilson Asset Management (WAM).
WAM Leaders aims to actively move around in the large caps to provide shareholders with blue chip exposure, but not just a passive investment style.
Its gross portfolio return (before fees, expenses and taxes) has been comfortably more than the S&P/ASX 200 Accumulation Index. WAM Leaders’ portfolio has outperformed the index by 9.7% over the past year and 4.7% per annum over the past three years.
Some of its largest 20 positions at the end of September 2020 included: Challenger Ltd (ASX: CGF), OZ Minerals Limited (ASX: OZL), Downer EDI Limited (ASX: DOW) and Star Entertainment Group Ltd (ASX: SGR).
LICs like WAM Leaders can use the investment gains to fund a stable and steadily growing dividend, which is what WAM Leaders is doing.
At the current WAM Leaders share price it offers a grossed-up dividend yield of 7.6%. However, the WAM Leaders net tangible assets (NTA) is no longer trading at an obvious discount to the share price as it was before.
Australian United Investment Company Ltd (ASX: AUI)
AUI is another LIC that invests in large cap ASX shares, but this one is a long-term investor which owns its positions for the long-term.
It’s actually one of the oldest LICs around, it was founded in 1953 by the late Sir Ian Potter and The Ian Potter Foundation Ltd is today the company’s largest single shareholder.
One of the most attractive things about AUI is its dividend record. It’s a very reliable ASX dividend share. Its website outlines that it has grown or maintained its dividend every year going back to 1993.
Another great benefit of AUI is its extremely low operating cost. In FY20 its management expense ratio (MER) was just 0.12%, which is one of the lowest on the ASX.
At the current AUI share price it offers a grossed-up dividend yield of 6.2%.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia owns shares of Transurban Group. 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.
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