Income seekers are naturally drawn to ASX dividend shares for their regular payouts. Yet, many make the mistake of solely prioritising the dividend yield on offer.
Everyone's personal circumstances are different. For younger investors, the focus might be capital appreciation potential — making a small, unpredictable yield perfectly fine. Whereas, those closer to retirement (or in it) are generally going to be more concerned about the predictability and longevity of their dividend income.
If I needed peace of mind that the dividends would keep flowing in for years — if not decades — to come, these are the 3 ASX dividend shares I would be holding.
These ASX dividend shares have moats for safety
A moat is some form of advantage that a company holds that gives it some level of protection from competition. If a moat is in place, there is a good chance the dividends will continue to grow as challengers are unable to take a bite out of the company's profits.
Loyalty and network effects
The first ASX dividend share I'd be confident in saying will still be around in a decade and paying shareholders is Medibank Private Ltd (ASX: MPL).
This private health insurance provider holds the largest market share in Australia at 27.4%. Importantly, this affords Medibank the ability to hold greater bargaining power when negotiating for lower out-of-pocket expenses when customers visit health providers.
Additionally, the company provides a loyalty bonus to its longstanding members which can act as a type of switching cost. Members of Medibank are less inclined to go elsewhere as it will mean giving up an accumulated discount.
I believe these moats make Medibank a much safer dividend payer than other areas of the market. Right now, the company offers a 4.5% yield.
Recognition and switching costs
Sleeping disorders are becoming more prevalent in the modern era and one of the most trusted names in sleep solutions is Resmed CDI (ASX: RMD).
With earnings growing at a compound annual growth rate (CAGR) of 14.7% over the last six years; and a profit margin above 20%; it isn't hard to see the evidence of some form of a moat in the hands of this medical device maker.
Once purchased, continuous positive airway pressure (CPAP) machines require ongoing part replacements. To its advantage, these devices can cost in excess of $1,500, deterring customers from going out and buying a competing product. As a result, the company continues to collect high-margin sales of its replacement parts.
Resmed currently pays a modest 0.8% dividend yield. However, there could be room for this to increase in the future as it only represents roughly 32% of profits at present.
Hard to beat this ASX dividend share
This final ASX dividend share on the list is a major beneficiary of economies of scale and cost leadership, in my opinion. Sonic Healthcare Limited (ASX: SHL) is one of the world's largest providers of laboratory, pathology, and radiology services — holding a market presence that is hard to replicate.
Conducting medical testing requires extremely expensive equipment. That's why Sonic has built a robust hub and spoke model over its 88 years of operation. This allows samples to be collected around the world and fed back to a handful of sites, running testing equipment 24/7.
The breadth of the testing equipment and the extensive reach of this model would take billions of dollars to contest. That's why I'd be content relying on dividends to keep landing in my account from this ASX share for many years to come.
Sonic Healthcare is offering a dividend yield of 3.3% at the time of writing.
