ASX dividend growth shares are an endangered species in 2020. This year has really separated the wheat from the chaff and the cream from the milk when it comes to dividend-paying shares. Many former ASX dividend stars have turned up to shareholders empty-handed this year as a result of the coronavirus pandemic. These include Westpac Banking Corp (ASX: WBC), Sydney Airport Holdings Pty Ltd (ASX: SYD) and Ramsay Health Care Limited (ASX: RHC).
But there are some shares that are growing their dividend instead. They are rare and may require you to look under rocks that you might not have before. The 2 ASX dividend shares that I’ve found below are both Listed Investment Companies (LICs), which operate a little differently to normal ASX shares. That’s because a LIC is itself an investor of a sort. LICs holds a portfolio of other shares on behalf of their owners. In this way, they can be a useful addition to a dividend portfolio.
1) MFF Capital Investments Ltd (ASX: MFF)
MFF Capital is a LIC that used to be part of the Magellan Financial Group Ltd (ASX: MFG). Even though MFF and Magellan have gone their separate ways to some extent, Magellan co-founder Chris Mackay remains MFF’s chief portfolio manager. Mr Mackay is regarded as one of the best fund managers in the country. MFF holds a portfolio of mostly US-based shares. Its top holdings are payment giants Visa and Mastercard, as well as Microsoft and Warren Buffett’s Berkshire Hathaway. It also has a sizeable cash position as of 28 August of 37.6%.
MFF is also a solid dividend payer. It has just announced a 3 cents per share fully franked final dividend, which was up from February’s 2.5 cents per share interim payout and gives the company an annualised yield of 2.25%. Further, the company has just announced that it intends to increase its biannual dividends to 5 cents per share over the next 3 years. That would equate to a 3.76% annualised yield on today’s prices.
2) WAM Global Ltd (ASX: WGB)
WAM Global is another internationally-focused LIC with a strong track record of dividend growth. This LIC also invests is US shares, as well as holdings from Europe, China and the United Kingdom. Some of its top holdings include Tencent Holdings, EA Games, Microsoft and Nomad Foods, as well as a 5.9% cash position. It’s run by the reputable Wilson Asset Management, which has developed a strong track record with its 20-year history of running LICs.
WAM Global has recently declared a fully franked final dividend of 4 cents per share, which doubled FY19’s final payout of 2 cents per share. That gives WAM Global an annualised trailing yield of 3.74% on current prices. The company has a profit reserve of 30.1 cents a share as well, so I think this dividend is well covered and sustainable. If this dividend growth continues at this rate (likely in my view due to the fat profit reserve), I expect WAM Global to be a top yielding ASX dividend growth share in just a few years.
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Sebastian Bowen owns shares of Magellan Flagship Fund Ltd, Mastercard, Ramsay Health Care Limited, Visa, and WAMGLOBAL FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Visa. The Motley Fool Australia has recommended Mastercard and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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