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Ending the year on a high note, the S&P/ASX 200 Index (ASX: XJO) rallied on the last trading day of 2022. The benchmark index climbed 0.26% to 7,038.7 points, following in the footsteps of the US stock market last night.

Nearly all sectors of the Australian share market were walking with a spring in their step on Friday. All except for one, the real estate sector — slipping slightly lower with broad weakness among popular property names.

The most significant move inside the top 200 came from Link Administration Holdings Ltd (ASX: LNK), taking a woeful 40% tumble. Although, the move was due to the company’s shares trading ex-distribution of its holding in the online conveyancing platform PEXA Group Ltd (ASX: PXA).

Top 10 ASX 200 shares countdown

It’s been an underwhelming year for the BrainChip Holdings Ltd (ASX: BRN) share price, but that didn’t stop the chip developer’s shares from taking off today. Despite the rather sizeable 12% move, there didn’t appear to be any information to explain the move.

Meanwhile, it was a sea of green for ASX lithium shares on Friday. Several lithium names made it into the top 10 following news in the United States that leased electric vehicles will also qualify for the US$7,500 in tax credits.

ASX-listed company	Share price	Price change
BrainChip Holdings Ltd (ASX: BRN)	$0.745	12.03%
Imugene Limited (ASX: IMU)	$0.145	7.41%
Lake Resources N.L. (ASX: LKE)	$0.80	5.96%
Costa Group Holdings Ltd (ASX: CGC)	$2.75	5.77%
Sayona Mining Ltd (ASX: SYA)	$0.19	5.56%
Core Lithium Ltd (ASX: CXO)	$1.025	5.13%
Liontown Resources Ltd (ASX: LTR)	$1.32	4.35%
Block Inc CDI (ASX: SQ2)	$91.94	4.12%
Novonix Ltd (ASX: NVX)	$1.47	3.89%
Telix Pharmaceuticals Ltd (ASX: TLX)	$7.27	3.71%

Our top 10 shares countdown is a recurring end-of-day summary to let you know which companies were making big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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More reading

• The 5 biggest threats to the stock market in 2023
• Could investing in the ASX 200 make me a millionare within a decade?
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Why is the Flight Centre share price in the red today?

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Link Administration and PEXA Group. The Motley Fool Australia has recommended Costa Group. 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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It has been a stinker of a year for the Bank of Queensland Ltd (ASX: BOQ) share price. In the space of 12 months, shares in the $4.5 billion Brisbane-based bank have fallen 17% in value — severely underperforming the S&P/ASX 200 Index (ASX: XJO).

However, shareholders were lucky enough to land more dividends in 2022 than the previous year. This begs the question: are Bank of Queensland shares worthwhile for passive income purposes?

Let’s delve into the details.

Is the dividend competitive with other banks?

When it comes to investing, we are all looking for the best place to deploy our cash. That’s why it would make sense to assess how the dividends from the Bank of Queensland stack up against the big four.

ASX-listed company	Dividend yield	Income from $5,000 invested
Bank of Queensland Ltd (ASX: BOQ)	6.7%	$335
Commonwealth Bank of Australia (ASX: CBA)	3.7%	$185
Westpac Banking Corp (ASX: WBC)	5.3%	$265
National Australia Bank Ltd (ASX: NAB)	5.0%	$250
Australia and New Zealand Banking Group Ltd (ASX: ANZ)	6.2%	$310

The table above shows that the Bank of Queensland can lay claim to the highest dividend yield of the bunch for now. Yet, the latest data shows that the Queensland bank holds the thinnest profit margin of those listed above.

At the end of FY22, the 148-year-old recorded a bottom-line margin of 25.5%. Meanwhile, the big four — except for Westpac — achieved a margin above 30% for the financial period. A deeper look into the financial statements would be needed to understand why.

Would I buy Bank of Queensland shares?

At a price-to-earnings (P/E) ratio of 10.7 times, this Aussie bank share looks considerably cheaper than CBA (read more here for my verdict on CBA shares).

Furthermore, the dividend yield on Bank of Queensland shares has historically hovered above 5%. That is certainly a respectable passive return. However, my concerns arise when considering total shareholder returns.

In the past five years, shareholders are down 27% even with the inclusion of dividends. Since the Bank of Queensland commenced trading on the ASX in 1999, the share price has climbed approximately 29%. That works out to be a compound annual growth rate (CAGR) of 1.1%.

Now, the next 20 years could be entirely different. However, being a bank outside of the big four is a tough business. It truly is a David and Goliath story if an outsider can outperform the big dogs of Aussie banking.

For that reason, I’d personally look for my passive income elsewhere.

The post Should I buy Bank of Queensland shares for passive income? appeared first on The Motley Fool Australia.

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More reading

• Why Bank of Queensland, Block, Fletcher Building, and Newcrest are dropping today
• 3 ASX 200 value shares I think could soar in 2023
• Could the VAS ETF outperform the BHP share price in 2023?
• ‘I want to explain’: Why did the Bank of Queensland share price pop then drop on Tuesday?

Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank Of Australia. 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 Westpac Banking. 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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The Core Lithium Ltd (ASX: CXO) share price is in the green today.

Core Lithium shares are soaring 6.15% to $1.035. For perspective, the S&P/ASX 200 (ASX: XJO) is climbing 0.46% today.

Let’s take a look at what could be impacting the Core Lithium share price.

What’s going on?

Core Lithium is not the only ASX lithium share in the green today. Sayona Mining Ltd (ASX: SYA) shares are soaring nearly 10%, while Pilbara Minerals Ltd (ASX: PLS) shares are jumping 2.85%.

Multiple US lithium giants also jumped higher overnight. The Sociedad Quimica y Minera de Chile (NYSE: SQM) shares leapt 2.9%, while Livent Corp (NYSE: LTHM) shares climbed 1.43%.

This follows news from the US Treasury Department that electric vehicles leased by consumers will qualify for a $7,500 commercial clean vehicle tax credit. This will also apply to EV’s made outside of North America. Lithium is an essential component of EV batteries.

Meanwhile, multiple big brands including Toyota, Fiat, Subaru and Ford are planning to launch EV’s in Australia for the first time in 2023, the Sydney Morning Herald reported.

Core Lithium is aiming to produce first spodumene concentrate from its Finniss Lithium Project in the first half of 2023.

A recent Industry Department report is predicting spodumene prices to soar from US$2,700 a tonne in 2022 to US$4,010 a tonne in 2023. The lithium price is then predicted to fall to US$3,130 in 2024. The report stated:

The strong growth in spodumene prices that saw Australia’s export revenue reach a record $4.9 billion in 2021–22 — up from $1.1 billion in 2020–21 — is expected to drive a further tripling in annual export earnings over the outlook period

Core Lithium share price snapshot

The Core Lithium share price has exploded 80% in the last year.

In comparison, the ASX 200 has lost 6% in the last year.

The post Why is the Core Lithium share price soaring 6% today? appeared first on The Motley Fool Australia.

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More reading

• Why Appen, Core Lithium, Paradigm, and Sayona Mining shares are racing higher
• Why are ASX 200 lithium shares charging higher today?
• Could the superprofits of ASX lithium shares be in danger next year?
• Could investing in the ASX 200 make me a millionare within a decade?
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. 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 no position in any of the stocks mentioned. 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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The Link Administration Holdings Ltd (ASX: LNK) share price is ending the week with a huge decline.

In afternoon trade, the financial administration company’s shares are down 39% to $2.01.

This is an improvement on its performance earlier in the day when the Link share price was down as much as 45% to a record low of $1.80.

Why is the Link share price crashing lower?

The good news for shareholders is that today’s decline is not necessarily a bad thing.

Last month, Link announced that it had agreed to sell 10% of its existing 42.77% shareholding in property settlements platform company PEXA Group Ltd (ASX: PXA). This led to Link generating total net proceeds of $101.9 million, which will be used to repay its borrowings.

At the same time, management revealed that it would distribute its remaining shares in PEXA to Link shareholders via an in-specie distribution.

Shareholders approved this plan earlier this month. As a result, next month they will receive one PEXA share for every 7.52 Link shares held at the record date rounded down to the nearest whole PEXA share.

This means that if you owned 1,000 Link shares valued at $3,290 at yesterday’s close, you would receive 132 PEXA shares valued at approximately $1,569 next month.

This morning, Link shares traded ex-distribution for these PEXA shares, which means that the rights to the distribution are now with the shareholders on its share registry at yesterday’s close. They won’t transfer to buyers.

As a result, the Link share price has dropped to reflect this. After all, you wouldn’t want to pay for something that you won’t receive.

Eligible shareholders can now look forward to receiving their PEXA shares on 10 January.

When this distribution takes place, Link will have no direct ownership in PEXA. Instead, it will comprise of four global businesses with total revenue of over $1.1 billion and Operating EBITDA of over $250 million.

The post Why is the Link share price crashing 39% at the end of the week? appeared first on The Motley Fool Australia.

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More reading

• Why Core Lithium, Downer, Link, and Renascor shares are dropping today
• Why is the Link share price crashing 10% on Thursday?
• ASX 200 tech shares deep in the red today. Here’s why

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Link Administration and PEXA Group. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Income seekers are naturally drawn to ASX dividend shares for their regular payouts. Yet, many make the mistake of solely prioritising the dividend yield on offer.

Everyone’s personal circumstances are different. For younger investors, the focus might be capital appreciation potential — making a small, unpredictable yield perfectly fine. Whereas, those closer to retirement (or in it) are generally going to be more concerned about the predictability and longevity of their dividend income.

If I needed peace of mind that the dividends would keep flowing in for years — if not decades — to come, these are the 3 ASX dividend shares I would be holding.

These ASX dividend shares have moats for safety

A moat is some form of advantage that a company holds that gives it some level of protection from competition. If a moat is in place, there is a good chance the dividends will continue to grow as challengers are unable to take a bite out of the company’s profits.

Loyalty and network effects

The first ASX dividend share I’d be confident in saying will still be around in a decade and paying shareholders is Medibank Private Ltd (ASX: MPL).

This private health insurance provider holds the largest market share in Australia at 27.4%. Importantly, this affords Medibank the ability to hold greater bargaining power when negotiating for lower out-of-pocket expenses when customers visit health providers.

Additionally, the company provides a loyalty bonus to its longstanding members which can act as a type of switching cost. Members of Medibank are less inclined to go elsewhere as it will mean giving up an accumulated discount.

I believe these moats make Medibank a much safer dividend payer than other areas of the market. Right now, the company offers a 4.5% yield.

Recognition and switching costs

Sleeping disorders are becoming more prevalent in the modern era and one of the most trusted names in sleep solutions is Resmed CDI (ASX: RMD).

With earnings growing at a compound annual growth rate (CAGR) of 14.7% over the last six years; and a profit margin above 20%; it isn’t hard to see the evidence of some form of a moat in the hands of this medical device maker.

Once purchased, continuous positive airway pressure (CPAP) machines require ongoing part replacements. To its advantage, these devices can cost in excess of $1,500, deterring customers from going out and buying a competing product. As a result, the company continues to collect high-margin sales of its replacement parts.

Resmed currently pays a modest 0.8% dividend yield. However, there could be room for this to increase in the future as it only represents roughly 32% of profits at present.

Hard to beat this ASX dividend share

This final ASX dividend share on the list is a major beneficiary of economies of scale and cost leadership, in my opinion. Sonic Healthcare Limited (ASX: SHL) is one of the world’s largest providers of laboratory, pathology, and radiology services — holding a market presence that is hard to replicate.

Conducting medical testing requires extremely expensive equipment. That’s why Sonic has built a robust hub and spoke model over its 88 years of operation. This allows samples to be collected around the world and fed back to a handful of sites, running testing equipment 24/7.

The breadth of the testing equipment and the extensive reach of this model would take billions of dollars to contest. That’s why I’d be content relying on dividends to keep landing in my account from this ASX share for many years to come.

Sonic Healthcare is offering a dividend yield of 3.3% at the time of writing.

The post 3 of the safest ASX dividend shares on Earth appeared first on The Motley Fool Australia.

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More reading

• I think these are the 10 best ASX shares to buy for 2023
• Bell Potter names 3 stellar ASX 200 shares to own in 2023
• Here are the top 10 ASX 200 shares today
• 3 ASX shares I’d buy after each fell by over 30% this year
• Looking to buy ASX shares for your kids this Christmas? I think these are great options

Motley Fool contributor Mitchell Lawler has positions in Sonic Healthcare. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed. 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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The BHP Group Ltd (ASX: BHP) share price is edging higher on Friday.

In afternoon trade, the mining giant’s shares are up a fraction to $45.80.

Where next for the BHP share price?

With a new year upon us, investors may be wondering where the BHP share price is heading next.

With that in mind, I thought I would take a look to see what analysts are saying about the Big Australian’s shares at current levels.

And, as you might have guessed, after a strong showing in 2022, (see below) opinion is quite divided on the mining giant now.

What are brokers saying?

Most brokers are sitting on the fence with hold and neutral recommendations.

Morgans, for example, downgraded the miner’s shares to a hold rating with a $44.80 price target earlier this month. This is largely in line with where its shares trade today.

The broker explained that the downgrade was made on valuation grounds. It said:

We can certainly see the potential green shoots for a recovery in demand drivers for steel, but it is also not hard to see a fresh bout of volatility before that recovery takes hold. We view current share prices on our large-cap iron ore miners as suggesting we have to ‘pay up front’ for that potential recovery, leaving us with lower conviction. As a result we downgrade our rating on BHP and RIO to HOLD (from ADD), while maintaining a REDUCE on FMG.

UBS went one step further and downgraded the miner’s shares to a sell rating with a $40.00 price target a couple of weeks ago. It said:

The macro backdrop is still fragile with global growth slowing and China’s reopening challenging in winter, iron ore fundamentals are still weak, and the stock is expensive at normalized commodity prices with free cash flow yield less than 5% at $80/ton iron ore and $180/ton met-coal.

The lone bull

As far as I’m aware, the lone bull at present is Macquarie with its outperform rating and $50.00 price target. This implies potential upside of approximately 9% for investors in 2023.

Macquarie likes BHP due to its belief that current iron ore prices could lead to the mining giant outperforming estimates in FY 2023. The broker is also expecting a generous 6%+ dividend yield next year to sweeten the deal further.

Time will tell which brokers make the right call.

The post What are brokers saying about the BHP share price in 2023? appeared first on The Motley Fool Australia.

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More reading

• The 5 biggest threats to the stock market in 2023
• Iron ore price in 2023: Bull vs. bear
• Better buy for 2023: BHP vs. Fortescue shares
• 3 ASX shares that could benefit from a predicted copper price boom next year
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 no position in any of the stocks mentioned. 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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ASX lithium shares are having a top run on the last trading day of 2022 in Australia.

Lithium shares charging higher include Pilbara Minerals Ltd (ASX: PLS), Core Lithium Ltd (ASX: CXO), Sayona Mining Ltd (ASX: SYA) and Allkem Ltd (ASX: AKE). For perspective, the S&P/ASX 200 Index (ASX: XJO) is lifting 0.53% today.

Let’s take a look at what is going on with ASX lithium shares.

What’s going on?

Core Lithium shares are surging 5.13% today while Sayona Mining shares are surging 6.94%. The Allkem share price is climbing 2.16%. while Pilbara shares are lifting 1.77%.

Lithium giants on Wall Street also leapt higher overnight. For example, the Sociedad Quimica y Minera de Chile (NYSE: SQM) share price jumped 2.9%, while Albemarle Corporation (NYSE: ALB) shares jumped 1.6%.

Investor sentiment on electric vehicle (EV) demand could be boosting lithium shares today. Lithium is an essential component of EV batteries.

In the USA on Thursday, the treasury department revealed EVs leased by consumers can qualify for $7,500 in tax credits. This will also apply to EVs assembled outside America, Reuters reported.

Meanwhile, big name electric vehicles are set to be launched in Australia in 2023, the Canberra Times reported. Toyota, Fiat, Subaru and Ford are among the big name car companies planning to sell EVs in Australia.

Core Lithium is targeting first spodumene concentrate production from the Finniss Lithium project in the first half of 2023.

Sayona Mining is planning to produce lithium concentrate at the North American Lithium project in Quebec in the first quarter of 2023.

Share price snapshot

The Pilbara Minerals share price has climbed 16% in the last year.

Core Lithium shares have lifted 78% in the last 52 weeks.

The Sayona Mining share price has soared 48% in the past year.

The Allkem share price has climbed 8% in the last year.

The post Why are ASX 200 lithium shares charging higher today? appeared first on The Motley Fool Australia.

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More reading

• Could the superprofits of ASX lithium shares be in danger next year?
• Could investing in the ASX 200 make me a millionare within a decade?
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• The top five ASX 200 shares in Macquarie’s model portfolio

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. 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 no position in any of the stocks mentioned. 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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The Flight Centre Travel Group Ltd (ASX: FLT) share price is on course to end a difficult year on a positive note.

At the time of writing, the travel agent giant’s shares are up 1.5% to $14.42.

However, as you can see below, Flight Centre shares will still end the year with a 12-month decline of over 20%.

Are Flight Centre shares trading at a New Year discount?

Flight Centre certainly is an interesting case.

I’m not aware of a single broker that has a buy rating on Flight Centre shares at the moment.

However, there are a large number of brokers that have price targets that imply material upside potential for its shares in 2023.

For example, earlier this month, analysts at Macquarie put a neutral rating and $17.35 price target on the company’s shares. This implies potential upside of 20% for investors from current levels.

Elsewhere, Citi currently has a neutral rating and $16.60 price target on its shares. If the Flight Centre share price were to reach that level, it would mean a 15% gain for investors from where it trades today.

Finally, Goldman Sachs currently has a neutral rating and $16.10 price target, which suggests potential upside of almost 12% for investors.

These analysts appear to be waiting for signs that margin pressures are easing before considering an upgrade to buy. Goldman Sachs commented:

Following the trading update flagging stronger than expected TTV trends, we revise our TTV expectations by +5.6%/3% respectively over FY23/24. However, we expect revenue margins to continue trending weaker into FY24 as inflation led recovery is only expected to normalize into late FY24.

Short interest

It is also worth noting that Flight Centre shares are the most shorted on the Australian share market, with a massive 14.7% of its shares held short.

Clearly, these short sellers believe its shares are overvalued and can still fall meaningfully from current levels, which is a risk for investors to consider.

Though, conversely, if sentiment shifts quickly, we could be in for an almighty short squeeze in 2023 given how much of its free float is held short.

All in all, it certainly makes Flight Centre one to watch closely next year.

The post Are Flight Centre shares trading at a New Year discount? appeared first on The Motley Fool Australia.

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More reading

• Why is the Flight Centre share price in the red today?
• Bought $1,000 of Flight Centre shares 10 years ago? Here’s how much dividend income you’ve received
• Here are the 10 most shorted ASX shares
• Here are the 10 most shorted ASX shares
• Looking to buy Flight Centre shares? Here’s why this insider tips 2023 to be a big year for business

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Flight Centre Travel Group. 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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If you’re looking for income options in 2023, then read on!

Listed below are three high-yield ASX dividend shares that you can pick up for less than the cost of a coffee.

Here’s why they have been tipped as buys:

Adairs Ltd (ASX: ADH)

Adair could be an ASX dividend share to buy. It is the leading furniture and homewares retailer behind the Adairs, Focus on Furniture, and Mocka brands.

According to a note out of Goldman Sachs, its analysts believe a big dividend is coming in 2023. This forecast is based on the broker’s belief that Adairs’ core business is far more resilient than the market is giving it credit for.

The broker is forecasting a fully franked dividend of 17 cents per share in FY 2023. Based on the current Adairs share price of $2.18, this will mean a 7.8% dividend yield.

Goldman has a buy rating and $2.65 price target on its shares.

Coronado Global Resources Inc (ASX: CRN)

Coronado Global Resources is a low cost global coal producer and exporter via a portfolio of operating mines in Queensland and the United States. Thanks to sky high coal prices, it has been tipped to deliver bumper earnings and dividends next year.

For example, Macquarie is expecting the coal miner to reward its shareholders with a 70 cents per share dividend in FY 2023. Based on the current Coronado Global share price of $1.99, this will mean a whopping 35% dividend yield.

Macquarie has an outperform rating and $2.80 price target on its shares.

Stockland Corporation Ltd (ASX: SGP)

A final high yield ASX dividend share that has been tipped as a buy is Stockland. It is a residential and land lease developer and retail, logistics and office real estate property manager.

Goldman Sachs is also positive on the company and has a buy rating and $4.40 price target on its shares.

Its analysts are expecting a 27.6 cents per share dividend in FY 2023. Based on the current Stockland share price of $3.66, this will mean a yield of 7.5%.

The post 3 ASX shares under $5 with 7%+ dividend yields appeared first on The Motley Fool Australia.

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More reading

• The ASX 200 share than turned a $5,000 investment into $2,400 of passive income in 2022
• Boost your passive income with these ASX dividend shares after Christmas: Brokers
• Here are the top 10 ASX 200 shares today
• 10 ASX shares I think are buys for 2023
• The cheap ASX shares to buy for dividends: Goldman Sachs

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. 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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Receiving passive income from my ASX dividend shares gives me a very satisfying feeling.

We don’t need to do any work ourselves to keep receiving the stream of dividends year after year. That’s down to the business to keep generating profits and the leadership’s decision to keep rewarding shareholders.

The great thing about passive income from ASX shares

Interest rates have shot higher this year. This means that investors can get a higher return than before from term deposits and savings accounts. I think that’s a good thing. Savers deserve a good return from money in the bank.

But, if a savings account earns $100 in interest, some (or all) of that money needs to stay in the bank account for it to earn higher interest next time (assuming the RBA hasn’t just increased the official cash rate).

But, ASX dividend shares have the ability to pay out some of its profit as a dividend and re-invest the retained amount to grow the dividend for next time. People can decide to spend that dividend if they want to, and hopefully still get a larger dividend next time.

I rely on ASX shares for dividend income

My investment strategy is to pick businesses that I think can grow their profit and dividends over the long term. I’ve written a number of articles about the shares I own and why.

In my opinion, it’s great to own businesses that pay me a larger passive income amount most years (or every year). It is easier to focus on the long-term if growing dividends keep flowing into my bank account, compared to seeing the market’s gyrations and volatility.

A bonus with many ASX dividend shares is that they attach franking credits to dividend payments. Franking credits are refundable tax offsets, improving the tax position for Australian tax residents.

Dividends are not guaranteed payments, but businesses that are growing their payouts are steadily increasing the cash return for investors.

One of the longest-running consecutive annual dividend increase records belongs to APA Group (ASX: APA) shares.

The bonus ‘secret sauce’ of dividend investing

For me, one of the great things about quality ASX dividend shares is that if they are growing the profit, they can fund bigger payments.

But, a secret sauce is that as profits rise over the years, investors are likely to value that profit generation at a higher level. In other words, higher profits can lead to capital growth with an improvement in the share price.

So, good ASX dividend shares can offer a solid starting dividend yield, dividend growth and potential capital growth as well.

I think passive investment income can be a great way to fund my future life, which is why I’m building up my portfolio.

The post How passive income generates free money for life (with a secret sauce!) appeared first on The Motley Fool Australia.

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More reading

• 3 ASX shares under $5 with 7%+ dividend yields
• The 5 biggest threats to the stock market in 2023
• How big will the CBA dividend be in 2023?
• Could the superprofits of ASX lithium shares be in danger next year?
• Could investing in the ASX 200 make me a millionare within a decade?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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 positions in and has recommended Apa Group. 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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