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As the tensions of the trade war resumed, as gold reached a record and interest rates fell in the United States, the month of August started well. Uncertainty is all around us, and this includes (as always) the stock market. Although the ASX has recently surpbaded its all-time record, I think it's time to be very cautious when deploying cash in the current market.
That said, here are two dividend ideas for August. Both offer strong and safe dividend yields (in my opinion) and both would bring a healthy weight to a portfolio.
Transurban owns and operates a wide range of toll roads throughout Australia and some in North America. There are several reasons why I really like Transurban as a defensive dividend share. Traffic congestion in capitals (particularly in Sydney and Melbourne) worsens every year, and incentives to use Transurban's roads are increasing, especially with population growth.
Tolls that Transurban drivers badume for the privilege of using its roads are also on the rise. Transurban's highways are governed by government contracts that allow an annual toll increase of 4% or the inflation rate – the higher of the two. Inflation being well below 2% in recent years (and no sign of such easing), Transurban has been able to store the real rates of return here and I'm expecting that it goes on for a while. Transurban offers a dividend yield of 3.68% on current prices.
Washington H. Soul Pattinson & Co. Ltd. (ASX: SOL)
"Soul Patts" is an ASX investment company that has been described as the "Berkshire Hathaway of the ASX". This enviable title comes from the diversified portfolio of quality ASX companies owned by Soul Patts.
These included TPG Telecom Ltd (ASX: TPM), New Hope Corporation Limited (ASX: NHC) and Brickworks Ltd (ASX: BKW). Unlike Berkshire, Soul Patts also pays a dividend, which is increasing every year since 2000 (a record almost unmatched on the ASX). At current prices, SOL shares report a dividend of 2.61%, but if you add postage credits, it goes to 3.73%.
Idea to take away
These two ASX Dividend Shares are quality companies that, in my opinion, provide investors with a solid and reliable income base for a portfolio. I expect that both can continue to increase shareholder payments in the foreseeable future, making them fantastic long-term reserves. I like the SOL shares a bit more in price, but TCL's 3.68% yield still represents a clear improvement over a term deposit.
For other good dividend stocks, read our favorites here!
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Sebastian Bowen, contributor for Motley Fool, does not hold any position in any of the actions mentioned. Motley Fool Australia owns shares and has recommended Transurban Group and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks. We fools may not all have the same opinion, but we all agree that taking into account a wide range of ideas makes us better investors. Motley Fool has a disclosure policy. This article contains only general investment tips (under AFSL 400691). Authorized by Scott Phillips.
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