ASX dividend shares can be an effective way to boost investment income because of their attractive yields.
There are plenty of businesses that could be identified as having compelling long-term dividend growth potential or reliability.
Companies may not be able to grow their dividend every single year, but dividends can steadily rise over time if the profit is generally heading upwards.
That's why these two businesses could be ones to consider for their possible dividend income:
Brickworks Limited (ASX: BKW)
Brickworks is a leading manufacturer and supplier of building products in Australia. It sells bricks, paving, masonry, stone, roofing, specialised building systems, precast, cement and timber battens.
It also has a presence in the US with brickmaking and distribution businesses, with a market-leading position in the north east of the country.
But there are two other asset groups that fund the Brickworks dividend. By the way, that dividend has been grown or maintained every year for the last 45 years.
The first asset of the ASX dividend share is its 50% stake of an industrial property trust along with Goodman Group (ASX: GMG). Industrial property is seeing more demand and higher valuations as businesses realise the importance of properties that are essential for e-commerce and logistics.
Brickworks' industrial property trust saw revaluation gains of $149 million. Coles Group Ltd (ASX: COL) and Amazon will soon be tenants at two of the biggest distribution warehouses in Sydney, which are currently being built by the trust. Once these warehouses are completed, it is expected to lead to a substantial increase in the rental profit and value of the trust.
In terms of current rental profit, the trust saw a 3% increase to $31 million over FY21.
The other thing that funds the dividend is its ownership of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares. Soul Patts is an investment conglomerate which owns investments in a variety of industries including telecommunications, resources, agriculture and financial services. In FY21, the Soul Patts dividend that Brickworks received increased by 3% from $56 million to $58 million.
Combined, those two assets fund the growing Brickworks dividend. In FY21, the board increased the Brickworks dividend by 3.4% to $0.61 per share. That translates to a grossed-up dividend yield of 3.4%.
Adairs Ltd (ASX: ADH)
Adairs is quite a different business to Brickworks. This ASX dividend share is a leader of homewares and home furnishings. It also owns the online-only furniture brand Mocka.
One of the reasons that Adairs has an attractive dividend yield is its low valuation. According to Commsec, the Adairs share price is valued at under 12x FY22's estimated earnings. In the current financial year, it's expected to pay a grossed-up dividend yield of 7.7%. That would represent a dividend payout ratio of 63%, leaving a healthy amount of profit in the business for re-investment.
One of the main areas that the company is looking to invest in is store floor space growth. Adairs says that store sales are highly correlated to store floor space, with each additional square metre adding around $4,000 in store sales. It's expecting to grow its total floor space by at least 8% in FY22 and then by at least 5% per annum over the next five years through new and upsized stores.
The ASX dividend share is growing its profit margins, particularly at its stores and online, thanks to scale benefits. A new national distribution centre is expected to lead to annual savings of $3.5 million per year, whilst also improving its ability to improve stock flow and fulfil online orders.
In FY23, Commsec numbers suggest that Adairs could pay a grossed-up dividend yield of 9.1%.
