The ASX share market is full of names that pay dividends to investors. But, there aren't many S&P/ASX 200 Index (ASX: XJO) dividend shares that I'd bet on to keep paying solid dividends for the next five years. After all, dividends are not guaranteed payments.
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Why dividend investing can work well
But, plenty of businesses can keep paying dividends during leaner times because they are still making a profit. A 10% reduction of profit for Telstra Group Ltd (ASX: TLS) would still mean it's making a large amount of money that it can pay to shareholders.
Share prices tend to go through volatility. It's possible for the share market to hit a bump every so often like it did in 2020 and 2022.
Over the longer term though, businesses can reinvest some of the profits that it makes back into the business to grow profit in the future. With the rest of the profit, it can pay dividends to shareholders.
It's this combination of dividends and long-term profit growth that can lead to pleasing dividend income payments as well as capital growth over time.
I'm going to cover three of my favourite ASX 200 dividend shares in this article.
There are plenty of smaller ASX dividend shares that offer larger dividend yields, but I think there is a higher chance of a dividend cut from names like Adairs Ltd (ASX: ADH) and Best & Less Group Holdings Ltd (ASX: BST) than the blue chip ASX shares I'm about to outline.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
In terms of dividend payment longevity, I think Soul Pattinson has the best record on the ASX.
It has been listed on the ASX since 1903, and it has paid a dividend every year since then. The ASX 200 dividend share has also grown its ordinary dividend every year since 2000, which is the longest dividend streak of consecutive annual growth.
This business operates as an investment house. Its investments are spread across a range of industries including both ASX shares and private businesses. For example, it owns a lot of shares of TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Pengana Capital Group Ltd (ASX: PCG), Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA).
In terms of unlisted businesses, it's involved in sectors like agriculture, electrical parts, swimming schools and luxury retirement living.
According to Commsec, it could pay a grossed-up dividend yield of 4% in FY23.
Sonic Healthcare Limited (ASX: SHL)
The Sonic Healthcare share price is close to its 52-week low, which has had the impact of boosting the prospective dividend yield for new investors.
For investors that haven't heard of this ASX healthcare share before, its core service is providing pathology services in a number of western countries including Australia, the UK, Germany and the US.
Its non-COVID testing revenue has continued to steadily grow, which I think can help grow its underlying profit over the long term. The company has a progressive dividend policy, meaning that it wants to grow its payment to shareholders.
The business has processed millions of COVID tests over the past three years, which gave it a temporary earnings boost. It was generating millions of dollars in revenue each month from COVID tests, as of October, though this seems to be steadily winding down. The company has used the cash flow boost to make acquisitions, locking in an increased scale.
The ASX 200 dividend share is investing in an AI partnership that could help improve pathology in the future.
According to Commsec, the Sonic Healthcare grossed-up dividend yield for FY23 could be 4.7%.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is the parent business of a number of leading Aussie retailers like Bunnings, Kmart, Officeworks and Priceline.
The company wants to grow dividends for shareholders over time alongside earnings and cash flow. FY22 saw the business grow its total dividend per share by 1.1%.
Even if retail does suffer a bit in 2023, I think its earnings are resilient. Customers may be more motivated to shop at stores like Bunnings and Kmart because they are among the national leaders in providing good value products. At least, that's what management would say.
I like that the business is open to expanding its business portfolio by making acquisitions, such as the Priceline business. Another example is the lithium project Mt Holland, in which Wesfarmers is a partner.
According to Commsec, Wesfarmers could pay a grossed-up dividend yield of 5.6% in FY23.
