There are some ASX dividend shares that have income yields of more than 4%.
The Reserve Bank of Australia (RBA) has lowered the official interest rate to just 0.25%, which is making it difficult for investors who are looking for income.
Here are three businesses that have dividend yields of more than 4%:
Brickworks Limited (ASX: BKW)
Brickworks is an ASX dividend share with one of the longest dividend records on the ASX – it hasn’t cut its dividend for over four decades.
Whilst the company is best known for being a building products business, its dividend is actually supported by two asset groups.
One asset group is its 50% stake of the industrial property trust with partner Goodman Group (ASX: GMG). Industrial property is in higher demand these days with an elevated level of online shopping from consumers and logistics needs from businesses. This trust provides growing rental profit distributions to Brickworks and Goodman.
There are currently two high-tech warehouses being built by the trust for Amazon and Coles Group Ltd (ASX: COL) at the Oakdale site in Sydney. These new buildings will send the gross asset value of the trust to more than $3 billion once they’re completed. It will increase the rental profit distributions to Brickworks by more than 25%. That could help fund the ASX dividend share’s payout in the coming years.
Brickworks also owns around 40% of investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which has a diversified portfolio. Soul Patts has been steadily growing its dividend and capital value for Brickworks over time.
At the current Brickworks share price it has a trailing grossed-up dividend yield of 4.5%.
JB Hi-Fi Limited (ASX: JBH)
JB Hi-Fi Australia is one of the largest retailers on the ASX. It operates JB Hi-Fi Australia, JB Hi-Fi New Zealand and The Good Guys.
At the current JB Hi-Fi share price, it has a trailing grossed-up dividend yield of 5.2%. This dividend came about after a 76.5% increase to the final FY20 dividend to 90 cents per share, bringing the total FY20 dividend to 189 cents per share, an increase of 33.1% compared to FY20.
The ASX dividend share has delivered more growth in the first half of FY21 with sales growth of 23.7% to $4.94 billion, a 75.9% increase of earnings before interest and tax (EBIT) to $462.7 million and an 86.2% increase of net profit after tax (NPAT) to $317.7 million.
Rural Funds Group (ASX: RFF)
Rural Funds is an agricultural real estate investment trust (REIT). It owns a diverse portfolio of farms across different sectors including almonds, macadamias, cropping (sugar and cotton), vineyards and cattle.
One of the main aims of Rural Funds is to increase its distribution by 4% per annum for investors, which is comfortably more than annual inflation.
There are two main ways that Rural Funds achieves that distribution growth.
Firstly, it has rental growth built into its contracts with high-quality tenants. The rental income at some farms grows by a fixed 2.5% per annum. At other farms the rental income growth is linked to CPI inflation. There are also occasional market reviews at some farms.
The ASX dividend share has a number of high quality tenants like Olam, JBS, Select Harvests Limited (ASX: SHV) and Australian Agricultural Company Ltd (ASX: AAC).
The other way that Rural Funds is growing its rental income is by investing in rental productivity improvements at some of its farms, particularly cattle in recent years. This has the benefit of increasing the farm value and also hopefully increasing the rental potential of that farm.
At the current Rural Funds share price, it has a distribution yield of 4.6% based on the guidance of a FY21 distribution of 11.28 cents per unit.
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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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