I'm always on the lookout for good ASX dividend shares that can provide investors with good potential to pay attractive dividend income.
We don't necessarily have to identify businesses with the biggest dividend yield. I'd rather find businesses that have fairly defensive operations and can pay resilient (and hopefully growing) payments.
There aren't too many companies that I think have a good chance of paying dividends consistently over the next decade and could grow the payments.
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Telstra Group Ltd (ASX: TLS)
Telstra is the largest ASX telco share around, with a market capitalisation of $50 billion, according to the ASX.
It's been through a lot over the last few years as its profit suffered through the transition to the NBN. The dividend took a dive after Telstra lost control of that infrastructure.
But, the NBN rollout has finished and now Telstra has started growing its dividend again. Profit is rising thanks to growing subscriber numbers, an improving average revenue per user (ARPU) and initiatives to cut costs.
The dividend income beast has acknowledged the importance of dividends to its shareholders and has an aim of growing the dividend if the financials allow.
In FY23, Telstra is projected to pay a grossed-up dividend yield of 5.6% and 5.9% in FY24.
I think the business has a long-term future because it seems like the internet and telecommunications are becoming increasingly important to society. This could suggest that Telstra's earnings are going to be resilient. Profit could keep rising as a higher percentage of devices are connected to the internet (cars, fridges and so on), while Australia's population keeps growing.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Pattinson is the leader in Australia at growing the dividend – the ordinary dividend has increased every year since 2000.
The business is an investment company that invests in a variety of sectors such as telecommunications, building products, resources, swimming schools, agriculture, financial services and so on.
Some of the specific ASX shares that it's invested in are TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Macquarie Group Ltd (ASX: MQG), Tuas Ltd (ASX: TUA) and Pengana Capital Group Ltd (ASX: PCG).
How does the dividend income beast fund its growing dividend? It has chosen to invest in "robust, defensible business models and uncorrelated assets" that can "perform throughout the [economic] cycle".
Its portfolio pays interest, dividends and distributions up to Soul Pattinson. The company pays for its expenses and then pays a majority of the cash flow out as a dividend. With the retained money, it can re-invest into more opportunities.
The business recently increased its FY23 interim dividend by 24.1% to 36 cents per share. Add that to the FY22 final ordinary dividend of 43 cents per share, taking the last 12 months of payments to 79 cents, meaning the trailing grossed-up dividend yield is 3.4%.
I like that the business can continue to adjust its investment by investing in new opportunities, which will hopefully allow the business to future-proof its portfolio in the years and decades ahead.
