I believe that the ASX dividend shares worth investing in are companies with good foundations to grow profit over time. It's hardly worthwhile investing in a business for a yield of a few per cent if it's a big risk that the share price could fall much more in value.
This is why there aren't too many ASX companies that I'd buy for dividend income. But, I believe the two ASX dividend shares details below are attractive for their underlying earnings growth, the starting dividend yield and dividend growth potential.
With that in mind, here's my pick of two leading candidates for defensive dividends.
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Rural Funds Group (ASX: RFF)
This real estate investment trust (REIT) invests in farmland around Australia.
It has a portfolio across several different agricultural industries, including almonds, macadamias, cattle, vineyards and cropping (sugar and cotton).
Rural Funds aims to grow its distribution for investors by 4% per annum. Inclusive of franking credits, Rural Funds expects to pay a distribution per unit of 12.2 cents in FY23, which translates into a forward distribution yield of 4.7%.
More than 40% of Rural Funds' rental revenue is linked to CPI inflation, so the higher rate of inflation can help its rental profit.
The ASX dividend share recently revealed that 52% of its adjusted total assets had been revalued during the second half of FY22. This saw a rise in value of $118 million, or $0.31 per unit.
Sonic Healthcare Ltd (ASX: SHL)
Sonic is one of the ASX market's largest healthcare shares. It has pathology operations in several countries, including Australia, the United States, Germany, the United Kingdom, Switzerland and Belgium. Radiology and clinical services are two other areas of focus in Australia.
The ASX dividend share has benefited from a lot of COVID-19 testing revenue. This has allowed it to make some acquisitions (for a total of $628 million in FY22) to boost its earnings profile for the long term. But COVID testing does continue. In July 2022, the first month of FY23, it saw $94 million of COVID-related revenue.
Sonic is also seeing a return to stronger growth for its non-COVID revenue. In July 2022, the base business organic revenue rose by 3.9% year over year. The base business saw 2% revenue growth in FY22.
The company has a "progressive dividend strategy" which is expected to continue in FY23 "and beyond". It has grown its dividend in most years over the past three decades. FY22 saw the total dividend increase by 10% to $1.00 per share. That means the FY22 grossed-up dividend yield is 4%.
In addition, Sonic Healthcare's partnership with artificial intelligence business Harrison.ai could unlock the next generation of services for patients.
FY23 could be a strong year for the base business due to a backlog of testing that was postponed during the pandemic.
Over the longer term, it can benefit from other growth drivers such as "ageing and growing populations, preventative medicine and new tests."
I think these factors can help earnings and grow the dividend over time.
