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Why I think these 2 ASX dividend shares are ideal for income investors

Many ASX investors seek income paying shares during times of volatility.
The post Why I think these 2 ASX dividend shares are ideal for income investors appeared first on The Motley Fool Australia. –

There are some ASX dividend shares I believe are well-suited to investment portfolios focused on income. And businesses that aim to pay investors an attractive dividend could be useful during this period of volatility and uncertainty.

While I wouldn’t buy a business only for the dividend yield, I think that dividends can form a handy portion of the total returns.

On that note, here are two ASX dividend shares I believe could be good options to consider for income-seekers:

Charter Hall Long WALE REIT (ASX: CLW)

This is one of my preferred picks in the real estate investment trust (REIT) space because of its diversification, long-term contracts and revenue growth potential.

In terms of the portfolio, at 31 December 2021, it had around 550 properties that were worth a combined $7 billion. It had a 99.9% occupancy rate, so that means this ASX dividend share is essentially not letting any properties go to waste by being empty.

The aim of this REIT is to own high-quality real estate on long-term leases with strong tenant covenants. Its weighted average lease expiry (WALE) at December 2021 was 12.2 years. This gives the business long-term rental visibility and stability, in my opinion, particularly when combined with the occupancy rate.

This ASX dividend share’s portfolio is spread across a number of different defensive tenant industries including pubs and bottle shops, government, telecommunications, grocery and distribution, fuel and convenience, food manufacturing, waste and recycling management and ‘other’.

Rental income growth is driven by annual increases in all leases, with 46% of leases linked to CPI and 54% of leases set up with an average fixed increase of 3.1%.

In FY22, the Charter Hall Long WALE REIT is aiming to achieve operating earnings per security (EPS) of at least 30.5 cents, reflecting year-on-year growth of around 4.5%. The distribution translates to a distribution yield of at least 6.8% in FY22 with a payout ratio of 100%.

Pacific Current Group Ltd (ASX: PAC)

This is a business that takes investment stakes in asset managers globally and helps them grow. It’s invested in a number of different fund managers including GQG Partners Inc (ASX: GQG), Banner Oak, Victory Park, Proterra and Carlisle.

The business is seeing ongoing growth of its portfolio’s funds under management (FUM), which is helping grow revenue and profitability. In the FY22 first half, FUM rose 16% to $165 billion, or 11% excluding the US$35 million new investment in Banner Oak. Underlying revenue rose 21% and underlying net profit after tax (NPAT) grew by 26% to $14.6 million.

The profit growth enabled a 50% increase of the interim dividend to 15 cents per share.

At 31 March 2022, this ASX dividend share reported that while its portfolio FUM decreased by $1.4 billion to $164 billion, in native currencies, US dollar-denominated fund managers saw FUM increase by 2.1% and Australian dollar-denominated fund managers saw a 3% rise in FUM.

FY23 earnings could be assisted by a full 12 months of earnings from GQG and Banner Oak. Fundraising progress in the FY22 second half from key private capital boutiques is expected to have a “significant” impact on FY23.

The last 12 months of dividends from Pacific translates into a grossed-up dividend yield of 8.2%.

The post Why I think these 2 ASX dividend shares are ideal for income investors appeared first on The Motley Fool Australia.

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More reading

Analysts name 2 ASX dividend shares to buy to combat inflation
‘Attractive, stable’: 2 ASX shares other companies rely on
Experts are tipping these ASX dividend shares as buys
2 ASX dividend shares I’d buy for passive income

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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