Finding top dividend-paying ASX shares is a hard ask these days. We’ve already seen dozens of ‘blue chips’ cut, defer or cancel dividend payments in 2020, including Transurban Group (ASX: TCL), Westpac Banking Corp (ASX: WBC) and Sydney Airport Holdings Pty Ltd (ASX: SYD).

I’m sure we’ll see a lot more by the end of the year, too.

So with this in mind, here are 3 ASX dividend shares that I think will make excellent choices for income in 2020.

Australia Foundation Investment Co Ltd (ASX: AFI)

AFIC is a listed investment company (LIC) that has been around since the 1920s. Since then, it has developed a reputation for conservative, broad-based investing with a focus on delivering fully franked dividends.

I think AFIC is well positioned to continue this tradition in 2020. Management has rotated away from ASX bank shares in recent months, with only Commonwealth Bank of Australia (ASX: CBA) appearing in the company’s top 5 holdings. Replacing them are shares like CSL Limited (ASX: CSL) and BHP Group Ltd (ASX: BHP)

On current prices, AFI shares are offering a trailing dividend yield of 4.16%, or 5.94% grossed-up.

Coles Group Ltd (ASX: COL)

Coles is another ASX blue chip that I expect to deliver strong dividend payments in 2020 and beyond. We all saw the rush on Coles and other supermarkets in the early stages of the coronavirus pandemic.

This ended up leading to a 12% sales bump for Coles in the quarter ending 31 March 2020. Coles has a dividend payout policy of 80–90% of earnings, so these sales should somewhat underpin its dividend payments for the rest of the year.

On current prices, Coles shares are offering a trailing dividend yield of 2.75%, or 3.93% grossed-up.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

This exchange-traded fund (ETF) is designed to maximise exposure to the ASX’s best dividend-paying shares. As such, it holds a basket of 62 shares that service this goal.

Much like AFIC, VHY’s portfolio has recently adapted to 2020 conditions by transitioning away from the ASX banks into more reliable dividend shares. I think this flexibility is a great asset during these uncertain times, and I like that management has been agile in this respect. Its top holdings now include BHP and Wesfarmers Ltd (ASX: WES).

The trailing dividend yields from ETFs can be a little more unreliable than individual ASX shares, but VHY brings it in at 6.7% for the trailing 12 months. Vanguard estimates VHY’s forward yield at 5.6% or 7.7% grossed-up.

More reading

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Sebastian Bowen owns shares of Vanguard Australian Shares High Yield Etf. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Transurban Group, and Wesfarmers 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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I think that high yield dividend shares could be the answer for income during these times.

The problem for some investors is that solid dividend shares like APA Group (ASX: APA) have seen the yield compressed as the share price rises.

Dividend shares with high yields may be able to boost your portfolio’s overall yield enough to get through this period.

Here are three ideas:

WAM Leaders Ltd (ASX:WLE)

This is a listed investment company (LIC) which invests in the larger businesses on the ASX.

It’s not necessarily a longer-term investor, so it may not matter that many of the biggest shares are cutting their dividends due to the coronavirus. WAM Leaders can make money from just the capital gain profits.

It can then turn those capital gains into a growing dividend for shareholders. It’s run admirably by lead portfolio manager Matthew Haupt.

WAM Leaders qualifies as a high yield dividend share because it has a grossed-up dividend yield of 8.8%.

WAM Research Limited (ASX: WAX)

This is another LIC operated by the investment team at Wilson Asset Management. This one is looking for small and medium growth shares on the ASX.

Again, most of the profits generated will come from capital growth rather than dividends from its owned shares.

Prior to the coronavirus sell-off, it was one of the best-performing LICs out there over the long-term. I think it could be one of the best again in the 2020s. 

I can’t think of many high yield dividend shares that would have paid out as much as WAM Research over the past decade. It started with a high yield and it has increased the dividend every year since the GFC.

WAM Research qualifies as a high yield dividend share because it has a grossed-up dividend yield of 10.4%.

Challenger Ltd (ASX: CGF)

Challenger is the Australian market leader of annuities. If someone takes out an annuity in Australia it’s likely to be a Challenger one, or at least a white label Challenger product.

The ageing demographics are on Australia’s side as more people are heading towards retirement over the next couple of decades.

Challenger is a high yield dividend share. But remember that a dividend is not an annuity, it’s not guaranteed. But Challenger did maintain its dividend during the GFC and with its normalised profit seemingly stable, Challenger may be able to keep paying its grossed-up dividend of 10.5%.

Foolish takeaway

All three of these shares have high dividend yields and could really boost your income. The low interest rate is probably problematic for Challenger for the longer-term, so with that in mind I’d probably go for WAM Research at this stage for its large dividend yield, the focus on growth and good portfolio diversification.

More reading

• Replace your term deposit with these dividend shares
• How I would build a $130,000 ASX dividend portfolio right now
• Here are 2 ASX dividend shares with yields over 10%
• My 3 best ASX dividend shares to buy right now
• These are the ASX blue chips I’d buy today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia owns shares of APA Group. 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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