ASX Share Ideas For An Income Portfolio

In our current environment of near rock bottom interest rates, term deposits are unlikely to provide you with the income you may require.

Australian shares can be one of the best ways to invest money for long-run growth, while also receiving some return along the way in the form of dividends.

Over the past 30 years, as interest rates have collapsed from 15% to 1%, Australian shareholders in companies like Commonwealth Bank of Australia (ASX: CBA) and Telstra Corporation Ltd (ASX: TLS) have reaped the benefits of generous fully franked dividends.

The Rask Finance video below explains franking credits:

Without further ado, here are four ASX dividend shares to potentially fill the income void that falling interest rates has left.

BHP Group Ltd (ASX: BHP)

BHP is a world-leading resources company, extracting and processing minerals (like iron ore and copper), oil and gas. The company more than 62,000 employees and contractors, primarily in Australia and the Americas.

Mining companies don’t often make for good income stocks, however, BHP is an exception to the rule. Unlike most ASX mining shares, BHP is actually profitable.

The company is well-diversified within the mining space and benefits from the enormous scale of its operations. The boom years may well be long over (for now) but BHP is still churning out strong profits and paying lucrative dividends to investors.

At the current share price, BHP trades on a historical dividend yield of 5.4%, which stacks up considerably well against some of the banks and popular industrial shares on the ASX.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Sydney Airport Holdings is the company that operates the Kingsford Smith Airport, currently having a 99-year lease on the airport that will revert back to government ownership at the end of this century. According to Sydney Airport, it generates $30.8 billion in economic activity a year, which is equivalent to 6.4% of the NSW economy.

The airport is a high quality asset that provides a defensive stream of earnings and is likely to be somewhat resistant to any economic downturn. This is a large reason why Sydney Airport shares have been soaring higher in recent years as interest rates have been crashing to record lows.

I would expect the Sydney Airport share price to come under significant selling pressure if interest rates were to go up. However, I think an increase in interest rates is extremely unlikely in the short to medium term, with rates much more likely to go down further before reversing higher — if at all.

Sydney Airport shares are currently trading on a historical dividend yield of 4.7%, which is appealing for income hungry investors.

National Australia Bank Ltd. (ASX: NAB)

In 2019, NAB was Australia’s largest lender to businesses. The company was recently in the news after announcing an additional $1.68 billion in charges relating to remediation following the Royal Commission, as well as in relation to its software capitalisation policy.

This recent news may place pressure on NAB’s dividend, which investors reacted to last week by pushing the share price down more than 5% in a matter of days.

Whilst a cut to the dividend is a risk, the recent weakness in the NAB share price may provide an opportunity for income investors. NAB already cut its interim dividend by 16% earlier this year in its half-year FY19 result, citing pressures on profit as a reason for the cut.

NAB shares currently trade on a historical dividend yield of 6.5%, making it one of the highest dividend paying shares on the ASX.

Transurban Group (ASX: TCL)

Transurban owns and operates 15 toll roads in Melbourne, Sydney, and the greater Washington area. Revenue growth is derived from traffic growth and its very own rivers of gold – inflation protected toll prices.

Transurban has some high-class assets in its portfolio, the largest being Citylink in Melbourne which accounts for roughly one third of its total toll revenue.

Toll revenue has steadily grown over the past decade, which has allowed the company to continually increase its dividend to shareholders.

Despite the Transurban share price running extremely hard over the past 12 months, the dividend yield is still a very strong 3.9%. Transurban’s valuation may be starting to look a little stretched at this point, however, with interest rates set to go even lower there may be room for more price growth to come.

How do you value an investment?

What does your process look like? Do you really understand what you’re investing in and why?

You should know, we’ve just asked our top analyst to put together a FREE valuation course and make them available to investors like you, for a limited time.

Complete with downloadable Excel models, templates and valuation tools, simply click here to access the course.

It’s completely free!

Disclaimer: Any information contained in this article is limited to general financial advice/information only. The information should not be relied upon because it has not taken into account your specific needs, goals or objectives. Please, consult a licenced and trusted financial adviser before acting on the information. Past performance is no guarantee of future performance. Nothing in this article should be considered a guarantee. Investing is risky and can result in capital loss. By reading this website, you acknowledge this warning and agree to our terms & conditions available here. This article is authorised by Owen Raszkiewicz of The Rask Group Pty Ltd.

Disclaimer: At the time of writing, the author has no financial interest in any of the companies mentioned.

Leave a comment


What can we do better? Leave us some feedback?

We care about your experience, please let us know if you have any suggestions to improve our site.