Dividend shares on the ASX could be great ways to reliably boost your income.
There are some well-known shares out there that have a high yield. For example, Telstra Corporation Ltd (ASX: TLS) has a grossed-up dividend yield of 5.9% and Commonwealth Bank of Australia (ASX: CBA) has a grossed-up dividend yield of 7.3%.
It has been a couple of years since each of those blue chips increased their dividend. I'm not sure it's a great idea to look at businesses that are stuck or going backwards. It's best to focus on businesses that have a history of growth, a setup for growth and an expectation for future growth.
Here are two top ideas:
Rural Funds Group (ASX: RFF)
Rural Funds is a farmland real estate investment trust (REIT). It has a FY20 distribution yield of 5.8%, so it definitely counts as a dividend share. It has increased its distribution by at least 4% each year and aims to increase its distribution by 4% a year for the foreseeable future. It certainly ticks the income box.
Is it reliable? Well, 100% of its farms are leased out to high-quality tenants such as Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE) and Singaporean food giant Olam. It has a weighted average lease expiry (WALE) of more than a decade.
The rental income is contracted to grow either by a fixed 2.5% per annum or it's linked to CPI inflation, plus market reviews. There's a lot to like about Rural Funds' income attributes.
InvoCare Limited (ASX: IVC)
InvoCare is the largest funeral operator in Australia and New Zealand. It has a trailing grossed-up dividend yield of 4%, it has a projected 2020 grossed-up dividend yield of 4.7%.
Is it reliable? As the saying goes, there are only two things certain in life: death and taxes. InvoCare has a market share of around a third, so it almost has a guaranteed amount of activity and earnings each year.
The last two years have been tough for InvoCare but (sadly) conditions are returning to the long-term average. The company is also finishing its renovations at many of its locations, which means the funeral can be more of a celebration rather than a sombre affair. And InvoCare can charge more for it.
Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050. This is a long tailwind.
Foolish takeaway
For reliable income I think Rural Funds would be a better choice because of how consistent its distributions will be. However, InvoCare could be the better long-term performer for capital growth with the underlying tailwind and stronger margins coming through.
