The ASX share market is one of the best places to find passive income, in my view. But, there are some businesses that could be a better source of dividends than others because of how they source their revenue.
Sometimes it’s difficult to predict how much demand a business is going to see for its offering.
Companies like BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO) and Adairs Ltd (ASX: ADH) can see revenue bounce around.
Wouldn’t it be great to know you have revenue locked in for a number of years? Normally, I’d write about Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), when it comes to long-term passive income, but there are two other businesses I really want to highlight.
Rural Funds Group (ASX: RFF)
Rural Funds has been one of my favourite real estate investment trusts (REITs) and I expect it will continue to be that way in the coming years.
Food is an exceptionally important commodity, so the farmland that Rural Funds owns is an important part of the national and global picture.
It owns various types of farmland including almonds, cattle, macadamias, vineyards and cropping, but it leases that land to agricultural tenants, ensuring the Rural Funds doesn’t carry major operational risks.
What makes it an effective pick for long-term passive income? It’s because it has a long weighted average lease expiry (WALE) with its tenants of approximately 13 years. In other words, the average tenancy rental agreement the ASX share has will expire in more than a decade, even if it didn’t sign any other long-term leases or renewals in that time.
That’s an extremely long time and suggests to me that the business has also largely locked in paying good passive distribution income in the coming years as well.
The business continues to invest in its farms to help maximise their rental income potential. But, rent is also growing organically, with most rental agreements having an indexation of either a fixed annual increase or a rise linked to inflation, plus market reviews.
Its guided FY26 payout translates into a distribution yield of 5.9%.
Charter Hall Long WALE REIT (ASX: CLW)
The other ASX share I want to highlight is this diversified REIT that owns properties across an array of commercial real state categories including pubs and hotels, telecommunication exchanges, service stations, distribution and logistics centres, manufacturing and so on.
I like the diversified strategy because it reduces risks and ensures the business can look across a wide range of areas for potential opportunities.
The one part of the strategy that all these properties have in common is that the ASX share has signed on tenants for years, providing appealing long-term income.
This ASX share has a WALE of around nine years, which is also a long time to have rental income locked in.
The business expects to grow its FY26 annual distribution by 2% to 25.5 cents per security, translating into a distribution yield of 7.6%, at the time of writing.
The post Looking for long-term passive income? Try one of these ASX shares appeared first on The Motley Fool Australia.
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Motley Fool contributor Tristan Harrison has positions in Rural Funds Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Adairs, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.