Passive income beasts: 2 ASX dividend shares I’d buy for the next decade

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computerA woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer

The ASX dividend shares I’m going to write about in this article look like passive income beasts to me. I think they’d be good buys for the next decade.

There is a wide range of businesses on the ASX, but I think there are some that could demonstrate defensive earnings and therefore pay resilient dividends.

Some parts of the economy seem to be rapidly changing, while others may be fairly predictable for the long term. That’s why I like the look of these two names.

Duxton Water Ltd (ASX: D2O)

The idea behind Duxton Water is that it is building a portfolio of permanent water entitlements with the aim it can then provide “flexible water supply solutions” to Australian farmers. It offers long-term entitlement leases, forward allocation contracts, and spot allocation supply.

I think water entitlements have a promising long-term future – water is obviously key for farmers. Growth (inflation) of food prices over time can further enable higher water prices.

The business has guided that the 2023 interim dividend will be 3.5 cents per share, the 2023 final dividend will be 3.6 cents per share, and the 2024 interim dividend could be 3.7 cents per share.

The ASX dividend share has shown a desire to grow the dividend payment for shareholders, which is promising for the next ten years for potential income growth.

At 31 March 2023, the business had a pre-tax net asset value (NAV) of $2.13 per share. The Duxton Water share price is currently $1.72 a share, a 19% discount to this, which is quite hefty. The company is currently doing a share buyback, which is also helping grow shareholder value.

I think the business can keep growing the asset value and dividends for investors over time. The next two dividends to be announced are expected to total 6.9 cents per share, which would be a grossed-up dividend yield of 5.7%.

Sonic Healthcare Limited (ASX: SHL)

Sonic Healthcare is a large, global pathology business.

The ASX healthcare share has grown its annual dividend per share each year since 2013, so it has already built a dividend growth streak of around a decade and I think it can continue growing the payment to shareholders for a number of years to come.

Sonic Healthcare actually has a stated progressive dividend policy, so it wants to grow its dividend each year for investors.

Over the last few years, it has benefited from the high level of COVID-19 testing that it carried out. Even in the first half of FY23, it was still seeing millions of dollars of COVID-19 testing revenue. That result saw the FY23 half-year dividend increase by 5%.

In the long term, I think the business will benefit from the return to a normalised level of testing for its core business, while expanding into new pathology services, including through its AI partnership project.

The company continues to make acquisitions, which I think is promising for expanding the scale of its business.

The post Passive income beasts: 2 ASX dividend shares I’d buy for the next decade appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Duxton Water. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare. 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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