I think there are some high-quality ASX dividend shares that are worthwhile owning for long-term income.
For me, investing for dividends is not about trying to find something that can pay a high yield in the short-term, but then there’s a chance the dividend could be permanently reduced to a mediocre level in the long-term. I want stability.
Resource businesses can be an exception because even a reduced dividend could still provide solid dividend yield, and we can be choosy when buying resource companies – they usually go in cycles, so a low point in the price/cycle would logically seem like a pretty good time to buy.
However, if I’m relying on a level of income, then I’d want to choose ideas that have a high chance of remaining reliable in regards to the dividend. But, remember that dividends are not term deposits. Having said that, these are two I’d like:
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
WHSP is one of my favourite dividend options. It has already proven, over many decades, that it has longevity. It has been listed for over a century. The great thing about it being an investment house is that it can alter its investment portfolio over the years so it can ensure it always has good long-term growth potential.
The business is invested in lots of different ASX shares like Brickworks Limited (ASX: BKW), TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), Pengana Capital Group Ltd (ASX: PCG), New Hope Corporation Limited (ASX: NHC), Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Macquarie Group Ltd (ASX: MQG).
It also has a growing private business portfolio. One of its main investments is Ampcontrol, a large Australian electrical engineering company. Ampcontrol has a strategy of to develop and supply advanced technology as well as innovative products and services that enable a competitive advantage in a net-zero carbon environment.
WHSP has grown its dividend every year since 2000, which is a strong record for an ASX share. It currently offers a trailing dividend yield of 3.9% including the franking credits. This is one of my favourite ASX dividend shares.
Rural Funds Group (ASX: RFF)
Rural Funds is a leading real estate investment trust (REIT) in the agricultural space. The main properties it owns are cattle farms, almond farms, macadamia farms and vineyards. But, there’s always scope for further diversification in the future.
The Rural Funds share price has fallen 14% over the last month. It has a goal of increasing its distribution by 4% per annum for investors, which is an attractive rate of growth in my opinion.
Rural Funds has provided guidance that the distribution (including franking credits) will be 12.2 cents in FY23, equating to a forward distribution yield of 4.7%.
Food is obviously vitally important for people, so I think the underlying demand for Rural Funds’ farms will stay attractive for a long time to come, perhaps forever.
I’d prefer to buy Rural Fund shares with a forward yield of at least 5%, but this could be a good starting point to build a position. Some of the ASX dividend share’s rental contracts are linked to CPI inflation, so the current situation is helping grow rental income.
