Why dividend investors should love Brickworks (ASX:BKW) shares

Brickworks Limited (ASX: BKW) could be one of the best ASX dividend shares for income investors to own.

There are a few factors why Brickworks is such a good ASX income share to think about:

Dividend reliability

Brickworks has a very strong record when it comes to the dividend. It hasn’t cut its dividend in around 45 years. That’s longer than plenty of Aussies have been alive.

Think of all of the global events and recessions that have happened in that time. Brickworks has been reliable in that whole period.

There hasn’t been dividend growth in every single year, but it’s reliable for people who need dividends to live.

In the recent FY21 half year result, Brickworks grew its dividend by 5% to 21 cents. Indeed, Brickworks says:

We are proud of our long history of dividend growth, and the stability this provides to our shareholders.

Diverse asset base

Most ASX companies pay their dividends from the operating profit each year.

Brickworks is different. Whilst it does make profit from its building products businesses, it’s the other assets that deliver the cashflow to pay the Brickworks dividends.

It owns a hefty chunk of investment conglomerate Washington H Soul Pattinson and Co Ltd (ASX: SOL) as well as half of a strong industrial property trust. Brickworks benefits from the diversification of the Soul Patts portfolio. Over the last two decades, Soul Patts had delivered annual shareholder returns of 13.6% over the last two decades.

At the release of its FY21 half-year result, it had four main asset segment values.

Its investment in Soul Patts was worth $2.9 billion. The 50% share of the industrial property trust had a net asset value of $777 million. The Australian building products division had net tangible assets (NTA) of $692 million. The North American building products division had net tangible assets of $208 million.

After including net debt of $479 million, the total inferred asset backing was $4.1 billion. That translated to an asset backing of more than $27 per share.

Brickworks noted that the building products asset value includes some parcels of surplus land, currently held at book value, but with a significantly higher market value.

More growth from the property trust

At Oakdale West, the property trust is constructing a state-of-the-art Amazon facility. It will have a total floor area of 190,000 square metres, across multiple levels, with a base floor area of 53,500 square metres. It’s also working on a large, high-tech facility for Coles Group Ltd (ASX: COL).

Combined, the Coles and Amazon facilities will occupy 119,500 square metres Across multiple estates, there is a total of 171,300 square metres of lease pre-commitments already secured. The completion of these facilities will grow the gross rent by around 40%.

Dividend yield

At the current Brickworks share price it offers a grossed-up dividend yield of 4.2%.

Outlook

Brickworks says that it’s in a strong position. The Australian division has a significant pipeline of work, which is translating into increasing building products demand, with a strong second half of FY21 expected.

In the US, Brickworks has seen a strong recovery in demand during March with improved weather and increase optimism of a recovery after COVID-19.

Brickworks also said that the completion of the planned property trust facilities will result in a significant uplift of the asset value.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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