When it comes to generating income from the Australian share market, having something dependable can be very important. Especially if you're using the income to fund your lifestyle.
After all, if you're investing in companies that have big fluctuations in their dividend payments each year, it could mean one year you're living like a king or queen, and the next you're only scraping by.
The good news is that the team at Investors Mutual has picked out a couple of ASX dividend shares that it believes offer dependable income.
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Which ASX dividend shares?
The ASX dividend shares in question are property company Charter Hall Retail REIT (ASX: CQR) and conglomerate Wesfarmers Ltd (ASX: WES).
The fund manager believes these shares offer three qualities that it looks for when finding ASX dividend shares. These are recurring earnings, capable management, and a record of strategic reinvestment of profits.
In respect to Wesfarmers, Investor Mutual said:
Putting valuation aside, a good example of this is Wesfarmers (WES), particularly the Bunnings franchise, which represents around 70% of its valuation. Bunnings is a very high-quality franchise which continues to go from strength to strength, generating strong, and increasing, cashflow. It is dominant in its industry and has become a part of popular culture and embedded in its communities with its DIY mentality, motivated staff and beloved sausage sizzles.
It continues to grow its earnings and dividends by rolling out more stores, broadening its product range, and improving its margins. The overall Wesfarmers dividend has benefited greatly from the Bunnings growth engine, and Coles which was demerged in late 2018.
At present, Wesfarmers shares trade with a fully franked trailing dividend yield of 3.85%.
What about Charter Hall Retail?
As for Charter Hall Retail, the fund manager said:
Another good example is Charter Hall Retail Real Estate Investment Trust (REIT) – ASX:CQR. We are cautious on the REIT sector overall as we think that valuations don't yet reflect higher interest rates, however there's always an exception to the rule and for us it's CQR. It has a high-quality, growing rental stream – 56% of its rent comes from supermarkets and petrol stations and 44% from largely non-discretionary specialty tenants.
Its shares currently trade with a very attractive trailing dividend yield of 7.2%.
