ASX dividend shares that pay bigger dividends in 2023 could be really interesting to some investors.
It might be hard for some companies to grow their profit and dividends in this period of rising inflation as higher costs like wages, rent and supply chains weigh on businesses.
But, growing dividends may be exactly what investors are looking for. With so many products and services becoming more expensive due to inflation, higher investment income could be the best way to combat that.
There are plenty of businesses that would like to grow their dividends. But there are a few dividend beasts that have committed to paying bigger payouts to shareholders.
Rural Funds Group (ASX: RFF)
Rural Funds is a real estate investment trust (REIT) that owns a diversified portfolio of farms across a range of industries. They include cattle, cropping (cotton and sugar), macadamias, almonds and vineyards.
The ASX dividend share aims to grow its distribution by 4% per annum.
It has forecast that the total distribution in FY23 will be 12.2 cents, which includes 47 cents of franking credits.
Three different factors contribute to this distribution growth.
The first is organic rental growth thanks to rental growth built into the contracts with tenants. Some of the increases are linked to CPI inflation, some are fixed (with a 2.5% annual increase) and some have infrequent market reviews.
The second strategy is investing in its farms. Sometimes that's just some sort of investment like adding water access or something of that nature. Other times it involves changing a farm to a more profitable use or planting crops. For example, it is currently working on a $165 million development for macadamias.
Finally, the REIT can make the occasional value-adding acquisition to the portfolio.
Including franking credits, the projected Rural Funds distribution yield for FY23 is 4.9%.
Duxton Water Ltd (ASX: D2O)
This ASX dividend share is another that's linked to the agricultural sector. But, like Rural Funds, its success isn't directly linked to food prices.
It's a business that owns water entitlements and can be leased to farmers for long-term leases or for short periods of time.
Duxton thinks that water entitlement values could remain supported and perhaps grow as more water-hungry permanent crops are planted, like almonds.
It's expecting to grow its dividend to 7.1 cents per share in FY23. At the current Duxton Water share price, its expected this ASX dividend share will pay a grossed-up dividend yield of 6%.
Sonic Healthcare Limited (ASX: SHL)
Sonic is a leading ASX healthcare share that has a "progressive dividend policy".
In FY22 the business grew its total dividend by 10% to $1. Sonic Healthcare also launched a share buyback.
It's benefitting from steady revenue growth (and operating leverage) of its base business which is predominately pathology. The ASX dividend share has a presence in multiple countries including the United States, Germany and Australia.
I also like that the business has used the cash flow boost from COVID testing over the last couple of years. It has made acquisitions and locked in more earnings for future years, rather than treating it as a one-off boost.
The company's link-up with artificial intelligence business Harrison.ai could develop into a very interesting partnership in the coming years.
While it hasn't provided specific dividend guidance, it's worth noting that the FY22 dividend would equate to a grossed-up dividend yield of 4.4% in FY23. But Sonic said that its "progressive dividend strategy [is] expected to continue in FY23 and beyond".
