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Date : 17/10/2023

3 ASX Shares with Strong Dividend Growth: A Closer Look

Many investors are searching for a passive income; for them, it isn’t just about potential capital gains but the promise of regular and growing dividend payouts. Stable income from dividends can make a significant difference, especially in a fluctuating market. But how does one identify companies that consistently grow their dividends?

Dividend growth, while attractive, is never a certainty. The ultimate decision rests with the company’s board, and importantly, the company needs to have churned out sufficient profits to distribute dividends.
Companies with a consistent history of raising their dividends are often seen as resilient, operating in stable industries or possessing robust assets that facilitate consistent payout growth. However, the simple growth of dividends shouldn’t be the sole criterion. The business valuation is an essential factor before making an investment decision.

Here, we delve into three ASX dividend stocks, Suncorp Group, Brickworks Limited and Tourism Holdings, all of which have an impressive record of dividend growth.

Suncorp Group Ltd (ASX: SUN)

Suncorp Group Ltd (ASX: SUN), one of Australia’s eminent insurance companies, boasts a portfolio of well-recognized brands, including AAMI, Apia, Bingle, Suncorp, and Vero. Beyond insurance, the company has banking arms, although these are in the divestiture phase.
Analysts have been positive about Suncorp, especially given the tailwinds in the general insurance market. The factors supporting this optimism include robust renewal premium rate hikes and the advantages of heightened investment yields. Goldman Sachs has expressed a favourable disposition towards the company, suggesting that the strong rate momentum will likely balance out volume pressures in specific portfolios.
On the dividend front, the brokerage house is projecting fully franked dividends per share of 76 cents for FY 2024 and 81 cents for FY 2025. Considering the current share price of $13.53, this translates to 5.6% and 6% yields, respectively. Goldman Sachs currently rates Suncorp shares as a buy with a price target of $15.13.

Brickworks Limited (ASX: BKW)

As the dominant brickmaker in Australia and the northeast US, Brickworks Limited (ASX: BKW) offers a diversified portfolio that extends to paving, masonry, and roofing, among others. The company’s strength and ability to maintain its dividend growth can be attributed to its strategic holdings, particularly in Washington, H. Soul Pattinson and Co. Ltd (ASX: SOL) and a 50% stake in the industrial property trust. This trust has a burgeoning portfolio of large industrial warehouses, a crucial source of rental profit that aids in funding higher Brickworks dividends.

Brickworks itself has maintained a steady dividend growth for nearly a decade. Brickworks remains a favourite among investors with a trailing grossed-up dividend yield of 3.7%.

Tourism Holdings Ltd (ASX: THL)

Tourism Holdings Ltd (ASX: THL) has been making waves in the recreational vehicle rental space. Recent strategic acquisitions have catapulted it to the position of the world’s premier commercial recreational vehicle rental operator.

The company has been steadily recovering from the downturn induced by the COVID-19 pandemic. Positive aspects include high rental yields and synergies from mergers. Morgans has expressed confidence in the company, citing its strong FY23 performance and the overall positive outlook.

In terms of dividends, Morgans anticipates dividends per share of 15 cents in FY 2024 and 17.6 cents in FY 2025. The current share price pegged at $3.33 suggests 4.5% and 5.3% yields, respectively. The brokerage has an add rating on Tourism Holdings shares with a price target of $5.02.


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