There are some great ASX dividend shares that can be sources of passive income for investors to help fund people's retirement.
One of the best things about income stocks in Australia is the benefit of franking credits, which has the effect of boosting the after-tax yield for investors. Franking credits are a refundable tax offset from companies that pay income tax in the Australian taxation system.
I have written about plenty of ASX dividend shares that I'd like to own in a retirement portfolio. On top of those names, I think the three below could be attractive ideas for a long time to come.
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Telstra Group Ltd (ASX: TLS)
Telstra has managed to build a reputation for being a good dividend payer. The shift to the NBN caused a cut in dividends. Before that, the business was paying out nearly all of its profit as a dividend, with not much investment for earnings growth.
But, things are now looking much better. In its recent FY22 result, Telstra grew its final dividend by 6.25% to 8.5 cents per share. A return to dividend growth is attractive.
The ASX dividend share's earnings base is now resilient – the shift to the NBN is over, and it's expecting earnings growth thanks to rising revenue per user, cutting costs, and diversification of earnings.
Telstra's earnings per share (EPS) could grow by double-digits in the next few years, which would be helpful for maintaining and growing the passive income further.
CommSec numbers suggest that by FY24, the telco could be paying an annual dividend per share of 18 cents, which equates to a grossed-up dividend yield of 6.7%.
Pacific Current Group Ltd (ASX: PAC)
Pacific Current has investment stakes in 16 asset managers around the world. The ASX dividend share helps them grow with strategic resources such as "capital, institutional distribution capabilities, and operational expertise".
It shares in the success of its managers – growth of funds under management (FUM) and management fees can help increase Pacific Current's earnings. In FY22 the business saw the underlying FUM grow by 19% to $169 billion.
Despite the asset market volatility, this ASX dividend share grew its annual dividend by 6% to 38 cents per share. That translates into a current grossed-up dividend yield of 6.7%. It has grown its dividend each year since 2017.
In the first three months of FY23, aggregate FUM grew 1.1% in Australian dollar terms. The business is expecting "strong growth" in FY23 and beyond as it recognises a full year of earnings from managers GQG Partners Inc (ASX: GQG) and Banner Oak, as well as other factors. This could boost passive income to shareholders.
CommSec numbers suggest that by FY24, it could be paying a grossed-up dividend yield of 8%.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is one of the leading ASX blue chip shares, in my opinion. It has a diverse and growing portfolio of businesses including Bunnings, Kmart, Officeworks, chemicals, energy and fertilisers (WesCEF), and more.
I like that the business can, and does, make acquisitions to diversify its earnings profile. It recently bought the Priceline business, which started a new healthcare division of Wesfarmers.
The business is also working on a new lithium project at Mt Holland. This could unlock an impressive earnings stream thanks to the high lithium prices we're currently seeing.
Wesfarmers usually pays out a healthy passive income each year, which is growing over time.
According to CommSec, it could pay an annual dividend of $1.94 per share in FY24. This would translate into a grossed-up dividend yield of 6%.
