I think it’s getting harder to find good value dividend shares these days.
The hunt for yield has pushed up the value of many ASX shares beyond what I’d be willing to pay for them, particularly the ones that are seen to have a defensive source of earnings.
But don’t fear, I think there are still some good opportunities to consider. For example, these three could be good ideas:
BetaShares FTSE 100 ETF (ASX: F100)
This is a new exchange-traded fund (ETF) provided by BetaShares.
As you may recognise, it provides exposure to the FTSE 100, being London Stock Exchange-listed businesses. But don’t let that fool you, there are plenty of global businesses that just happen to be listed in the UK such as Royal Dutch Shell, HSBC, BP, Diageo, Unilever, Astrazeneca and GlaxoSmithkline.
Brexit is creating a lot of uncertainty for UK shares, even if a lot of their earnings are outside of the UK (or even outside of Europe), which helps us buy shares at a cheaper price. The index’s p/e ratio is around 12.5x.
The trailing dividend yield of the index is 4.8%, which is attractive in this low interest rate era. The new ETF currently has a management fee of 0.45%.
Future Generation Investment Company Ltd (ASX: FGX)
Future Generation is a fairly unique listed investment company (LIC) in that it doesn’t charge any management fees or performance fees (there are a couple of others with a similar structure).
The idea is that Future Generation invests in the funds of other investment managers who work for free to invest the money into ASX shares.
That means the underlying Future Generation funds are invested across a variety of shares, giving good diversification and can hopefully beat the market over the long-term.
One of the main objectives of Future Generation is to provide a steadily-growing dividend. It currently offers a grossed-up dividend yield of 5.6%.
WAM Microcap Limited (ASX: WMI)
Small caps aren’t known for being dividend shares, but if you invest in a LIC which can turn those capital gains into a dividend stream for you, then you can get the benefit of small cap growth but also a growing dividend.
WAM Microcap invests in a variety of small cap shares with market capitalisations under $300 million at the time of acquisition. It has been a strong performer, generating average returns per annum of around 18% before fees and expenses, but don’t expect that happen every 12 months – small caps are volatile.
It has a grossed-up dividend yield of 5.1%.
Each of these options offers a solid dividend yield with growth potential and diversification. I’d be happy for each of them to play a sizeable role in my portfolio at the current prices if I were looking for dividends.
Here are some more great dividend shares to think about for your portfolio.
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Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO and WAM MICRO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019