Are you new to ASX share investing? Then you're in luck because now is a great time to start investing for passive income.
Share market volatility resulting from inflation and interest rates has led to lower share prices in many cases. That's great news for people buying shares because not only are valuations cheaper, but the dividend yields are bigger!
For example, if a company has a 5% dividend yield and the share price drops 10%, that yield becomes 5.5%.
To reach $10,000 of annual passive income, we're talking about a very sizeable portfolio value. It'd take a $100,000 portfolio with a 10% dividend yield to achieve $10,000 of annual income. It will take time to reach that goal, but compounding, profit growth and re-investing dividends can help accelerate the journey.
I'm going to discuss three high-yield ASX dividend shares that I think can grow their payouts over time. Having said that, diversification is an integral part of investing, and lower-yielding businesses can also work really well if they grow the dividend at a healthy pace. It's good to own more than three companies.
I've been buying this ASX share for my own portfolio, so I'm putting money where my mouth is.
Metcash supplies many independent food and liquor retailers, including IGA supermarkets, Foodland supermarkets, Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Thirsty Camel, Big Bargain Bottleshop, and Duncans.
I think the food and liquor divisions provide Metcash with defensive earnings and can help support the dividend in uncertain times.
The company also has an impressive hardware division, which includes Mitre 10, Home Timber & Hardware and Total Tools.
Ongoing population growth can help boost demand for more properties, food and liquor, so the business has a solid underlying tailwind there.
Metcash's generous dividend payout ratio policy is 70% of underlying net profit after tax (NPAT). According to Commsec, the ASX share could pay a grossed-up dividend yield of 7.75% in FY25.
This real estate investment trust (REIT) owns a large portfolio of different properties which are all leased on long-term contracts, providing excellent rental security and visibility.
The ASX share is invested in things like telecommunication exchanges, service stations, warehouses, Bunnings Warehouse properties, quality retail locations, and more. Most of the tenants leasing these properties are large and appear dependable.
The rental contracts generally either have fixed annual increases or are linked to inflation, which can help drive rental profit in future years.
Charter Hall Long WALE REIT usually pays out 100% of its rental profit each year, creating a good yield.
According to Commsec, it's projected to pay a distribution yield of 7.8% in FY25.
This is another ASX share I've been buying for my own portfolio.
Accent is a major retailer in Australia. It acts as the local distributor of global brands, including Hoka, Kappa, Vans, Skechers, CAT, Henleys, Merrell and Ugg. The ASX share also owns its own brands including Glue Store, Platypus, Stylerunner and The Athlete's Foot.
The business is steadily adding more stores to its network across all of these different brands, giving it more scale.
Accent usually trades on a relatively low price/earnings (P/E) ratio, which is understandable considering the nature of what it does. The low valuation unlocks a large potential dividend yield for the business.
According to Commsec, it could pay a grossed-up dividend yield of 10.1% in FY25.