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Building up income: 2 ASX dividend shares I believe are a buy

In a rising interest rate environment, I think ASX dividend shares are looking even better opportunities.
The post Building up income: 2 ASX dividend shares I believe are a buy appeared first on The Motley Fool Australia. –

Amid all the volatility in the share market, I think ASX dividend shares are looking even more attractive.

Issues such as high inflation and rising interest rates are hurting share prices and other assets.

While it’s a tricky situation for some companies and investors, I think these lower prices make some of my preferred income ideas seem even more compelling because it’s boosting the potential dividend yields on offer.

Dividends are not guaranteed returns, but I think the below two ideas can reward investors’ patience with the delivery of solid cash payments.

Brickworks Limited (ASX: BKW)

Brickworks is one of my favourite ASX dividend shares because of the company’s impressive dividend record.

Its normal dividend has been maintained or increased every year since 1976. That means it has been 46 years since the normal dividend last decreased. In the FY22 half-year result, the company grew its interim dividend by 5% to 22 cents per share.

One of the main contributors to Brickworks’ growing dividend is its large holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares. The investment conglomerate owns a diversified portfolio containing a number of different ASX shares, including TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC), Brickworks itself, Pengana Capital Group Ltd (ASX: PCG), and Tuas Ltd (ASX: TUA). Soul Pattinson also has private business investments.

Soul Pattinson has grown its dividend every year since 2000 for shareholders like Brickworks.

The other key area of the ASX dividend share that I like is its 50% share of an industrial property trust in partnership with Goodman Group (ASX: GMG).

This property trust is building large industrial buildings, such as warehouses, on excess land that Brickworks no longer needs. Not only is Brickworks benefiting from the completion (and valuation uplift) of these warehouses, but it’s also benefiting from growing rental income as well.

There is enough land for a building pipeline for several years in the trust.

Brickworks currently has a trailing grossed-up dividend yield of 4.9%.

Centuria Industrial REIT (ASX: CIP)

This real estate investment trust (REIT) is another business with a connection to industrial property. It describes itself as the largest pure-play industrial REIT on the ASX. It looks to provide investors with income and an opportunity for capital growth.

Properties in the portfolio are located in urban, land-constrained markets with access to densely populated catchments. It’s positioning the portfolio towards “capturing rising tenant demand while benefiting from rental growth in highly sought industrial markets”.

The ASX dividend share has also said it’s benefiting from the increasing trend of onshoring and reshoring supply chains to ensure business continuity, combined with the continued adoption of e-commerce.

It has provided guidance of funds from operations (FFO) of at least 18.2 cents per unit – that’s essentially the rental profit – and distribution guidance of 17.3 cents per unit. That means it’s valued at 16 times its estimated rental profit with an FY22 distribution yield of 5.8%.

The post Building up income: 2 ASX dividend shares I believe are a buy appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.* Scott just revealed what he believes could be the “five best ASX stocks” for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now

See The 5 Stocks
*Returns as of January 12th 2022

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More reading

Why ASX-listed property shares could be on the chopping block
Analysts name 2 top ASX 200 dividend shares to buy now
Is it time to go bargain hunting for ASX shares?
What is the current dividend yield on Brickworks shares?
Experts name 2 ASX dividend shares for income investors to buy now

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended TPG Telecom Limited. 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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