Some income investors are attracted to ideas like Telstra Corporation Ltd (ASX: TLS). But I think there are plenty of other ASX dividend shares that could be better picks.
For starters, Telstra has seen painful share price declines over the past year, five years and since listing over two decades ago. In terms of the dividend per share, it has almost halved since 2017. In this article I’m going share three different potential dividend ideas:
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
WHSP has been the most consistent ASX dividend share over the past two decades. It has grown its dividend every year since the start of this century in 2000. If you’re looking for dividend growth every year, this could be the best bet on the ASX.
But it’s not just about the dividend. This company generates impressive long term capital returns as well. Over the past five years the WHSP share price has gone up 70%.
It’s invested in both listed and private businesses. Some of its public holdings include TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Australian Pharmaceutical Industries Ltd (ASX: API) and Palla Pharma Ltd (ASX: PAL). Private investments include resources, agriculture, financial services and swimming schools.
Each year WHSP keeps some of its net operating cashflow to re-invest into more opportunities. Also, its own investments keep growing too and will hopefully keep increasing their dividends to WHSP.
At the current WHSP share price it has a fully franked dividend yield of 2%.
MFF Capital Investments Ltd (ASX: MFF)
MFF Capital is one of the best listed investment companies (LICs) on the ASX, in my opinion. Both its costs (which are low) and long term net performance (which is high) are top notch.
One of the great things about a LIC is that they can buy shares at strategic times (when prices are low) and some LICs, like MFF Capital, have the mandate to invest anywhere in the world.
It has plenty of quality investments in its portfolio like Visa, MasterCard, Amazon, Home Depot, Facebook, Berkshire Hathaway, Bank of America, Prosus, Microsoft, CK Hutchison and Intercontinental Exchange and L’Oreal.
The LIC has been steadily growing its dividend in recent years and has plans to increase the dividend to an annual payment of 10 cents per share, equating to a fully franked dividend of 3.75% at today’s MFF Capital share price.
Magellan Financial Group Ltd (ASX: MFG)
This fund manager business has been growing its ordinary dividend, whilst also paying out special dividends from regular investment outperformance.
Its funds under management (FUM is regularly growing – it’s now approximately $103 billion. What most excites me about Magellan now is the potential diversification of its earnings.
Almost all of its profit currently comes from managing portfolios for its existing investment strategies (international shares, infrastructure shares and ASX shares). But now Magellan is launching diversified ETFs, it’s planning to launch retirement products and most importantly (for me) it’s investing directly in operating businesses like Barrenjoey and Guzman y Gomez.
If Magellan has a plan to turn itself into a Berkshire Hathaway-like company then it opens many more growth avenues for Magellan. The dividend could steadily keep growing from here if its investments turn out well.
At the last Magellan share price, it has a partially franked dividend yield of 4%.
There are also other ASX dividend shares to consider ahead of Telstra including Brickworks Limited (ASX: BKW) and APA Group (ASX: APA).
