Dividends are very important to people who are trying to find income right now.
The RBA has pushed the Australian interest rate to below 1%, how are retirees supposed to manage with that?
I believe it would be prudent to keep a year or two of living expenses as cash in the bank, but the rest of capital may need to be put to work in the share market. So, here’s two dividend shares that could be ideas:
Washington H. Soul Pattinson (ASX: SOL)
WHSP is an investment house business which has been on the ASX for over a century. Its origins are in owning and operating Australian pharmacies, which is where the Soul Pattinson chemist chain comes from, however, that business is now owned by Australian Pharmaceutical Industries Ltd (ASX: API), which WHSP owns 19.3% of. WHSP invests in a large number of companies across a variety of industries such as construction, resources and telecommunications.
WHSP might be one of the most secure ideas for dividends on the ASX. It receives a diverse stream of payments from its investments ranging from listed investment companies like Bki Investment (ASX: BKI) to major telco company TPG (ASX: TPM).
Each year WHSP funds its dividend from the net cashflow it generates and re-invests the rest into more opportunities.
It currently has a fully franked dividend yield of 2.6% (or 3.7% with the franking credits).
Viva Energy Reit (ASX: VVR)
As the name might suggest, it’s a real estate investment trust (REIT), meaning it owns commercial properties and leases them out for a pretty good yield.
It owns 464 service stations across Australia, with 316 of them in metropolitan areas. It has a weighted average lease expiry (WALE) of 12.1 years, with nearly all leased to Viva Energy Australia (ASX: VEA), which sells the fuel at Coles (ASX: COL) Express locations.
The attractive thing about this REIT is that 95% of its annual rent reviews are a fixed 3% increase, so shareholders can expect a steady increase of earnings and distributions.
Electric vehicles are a long way to being the majority of the cars on the road, even when they are Viva Energy can add electric chargers to all of them.
Viva Energy REIT currently has a distribution yield of 4.8%.
Summary
WHSP would be my preferred option of the two. It is far more diverse, is trading at around the underlying value of its assets and has an excellent dividend record.
When you mix income and growth you can create a strong mix, so I’m looking at the growth shares in the free report below as investment ideas.
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Disclosure: Jaz owns shares of WHSP at the time of writing, but this could change at any time.