Why I think these 2 ASX shares are ideal for income investors

These stocks could be what some Aussies are seeking.

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Some ASX shares can provide a very pleasing level of dividend income, but which ones are worth owning?

Companies such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Woodside Energy Group Ltd (ASX: WDS), and Westpac Banking Corp (ASX: WBC) are well-known for paying dividends. However, they do not necessarily have a strong track record of consistently increasing their dividend payments each year. In fact, I believe that their dividend growth may be slow in the coming years.

Therefore, I'd ideally want to own businesses that can deliver longer periods of dividend growth and offer investors a pleasing dividend yield today.

With that in mind, I think the two stocks below are compelling options for dividends, growth, and diversification.

Medibank Private Ltd (ASX: MPL)

Medibank is the largest private health insurance business in Australia, with its Medibank and ahm brands. In my eyes, private health insurance is a defensive sector because most people value their health.

The rising policyholder numbers are helping Medibank grow its operating profit, which is assisting dividend growth for the ASX healthcare share. In FY24, the business reported that its net resident policyholders grew by 14,400, and net non-resident policy unit growth was 69,000.

Medibank reported that its operating profit increased 7.9% to $700 million, and overall underlying net profit grew 14.1% to $570.4 million. This helped send the dividend per share higher by 13.7% to 16.6 cents. The latest annual payout translates into a grossed-up dividend yield of 6.2%, including franking credits.

Universal Store Holdings Ltd (ASX: UNI)

In my eyes, Universal Store is one of the most impressive ASX retail shares. Its apparel products are aimed at younger Australians through the brands Universal Store, Perfect Stranger, and CTC (THRILLS and Worship).

Despite all the economic uncertainty, the company revealed very impressive results in FY24, with sales growth of 9.7% to $288.5 million, underlying operating profit (EBIT) growth of 16.6% to $47.1 million, and net profit after tax (NPAT) growth of 45.3% to $34.3 million.

I believe this company can continue to grow profit by rolling out more stores in Australia, particularly Perfect Stranger. When it gave an update about the first 17 weeks of FY25, the company said it was on track to achieve nine to 15 new stores in FY25 – it had 102 at the end of FY24.

In that update, the business also said Perfect Stranger's total sales were up 111.1% year over year.

The ASX share has a promising growth outlook, which would be very helpful for the company's dividend. In FY24, it grew its annual dividend to 35.5 cents – it has increased its dividend each year since it started paying one in 2021.

The business has a grossed-up dividend yield of 6%, including franking credits.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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