Overinvested in NAB? Here are two alternative ASX dividend stocks

Additional stocks could be an appealing option to improve income diversification.

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Owning National Australia Bank Ltd (ASX: NAB) shares for dividends has been rewarding over the last decade. But, there are a number of other ASX dividend stocks that would make pleasing contributions to someone's passive income, while also improving portfolio diversification.

NAB is a solid business, but banking is not known for being a high-growth industry. The bank's size also makes it difficult to continue growing at a strong pace. According to the ASX, it currently has a market capitalisation of more than $100 billion. Doubling in size could take a long time.

It's particularly tricky for NAB because there are so many competitors that can offer customers a very similar product such as Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), Macquarie Group Ltd (ASX: MQG), Bank of Queensland Ltd (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN).

For investors wanting large, stable ASX dividend stocks that offer sizeable passive income which could also deliver solid capital growth, I like the two below.

Telstra Group Ltd (ASX: TLS)

Telstra is Australia's largest telecommunications business. It boasts millions of subscribers, the widest network coverage and the strongest spectrum assets.

I believe Telstra's earnings can grow significantly faster than NAB over the next five years thanks to its growing subscriber base and the average revenue per user (ARPU). Due to the strength of Telstra's network, it is able to offer customers a unique product. That compares favourably, in my mind, to NAB's position in a competitive market.

The broker UBS is currently estimating that Telstra's net profit after tax (NPAT) could rise by 44% between FY25 to FY29 where the bottom line could reach $3.29 billion. The broker estimates NAB's profit is only going to grow by around 11% between FY25 to FY29.

UBS estimates Telstra could pay an annual dividend per share of 19 cents in FY25. This translates into a grossed-up dividend yield of 6.1%, including franking credits. The broker forecasts Telstra could grow its dividend every year between now and FY29.

Charter Hall Long WALE REIT (ASX: CLW)

Another business I want to highlight is this real estate investment trust (REIT) which has a diversified portfolio of properties.

Some of the areas it's invested in include hotels and pubs, government-tenanted offices, data centres and telecommunication exchanges, service stations, grocery and distribution centres, food manufacturing, waste and recycling management, retail, banking, financial, defence services and so on.

I really like the diversification of the ASX dividend stock's portfolio. It also produces an appealing level of rental income thanks to its occupancy rate of 99.8% and a weighted average lease expiry (WALE) of more than nine years.

It is rewarding investors with a generous distribution payout ratio of 100% of its rental profits, which creates a strong yield. It's expecting to pay a distribution yield of 6.6% in FY25.

The business is benefiting from organic rental growth that's either linked to inflation or sees annual fixed increases. In the FY25 first half, its like-for-like property income growth was 3.5%, which I think is a solid growth rate for a defensive business like this one.

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 positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank, Macquarie Group, and Telstra 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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