Overinvested in Rio Tinto shares? Here are 2 alternative ASX dividend shares

Plenty of Aussies may be attracted to Rio Tinto Ltd (ASX: RIO) shares for the possible dividend income, but it could be beneficial to own other ASX dividend shares too.

Don't get me wrong, I like Rio Tinto as a diversified ASX mining share. I appreciate its exposure to copper as an electrification exposure. The commodities of bauxite, aluminium and lithium also have compelling futures.

However, as an ASX dividend share, Rio Tinto can't necessarily provide the level of dividend consistency that some investors may want. Commodity prices and miner profits are volatile. Investors could see their dividend income fall, but life expenses stay the same (or increase).

Let's look at two stocks that could provide a fairly consistent payout.

Charter Hall Long WALE REIT (ASX: CLW)

This is a real estate investment trust (REIT) that owns a diversified portfolio of commercial properties. That includes office buildings leased to government entities, pubs and bottle shops, telecommunication exchanges, service stations and so on.

One of the main attractions of this ASX dividend share is its long-term rental contracts with quality tenants. At 30 June 2024, the business had a weighted average lease expiry (WALE) of 10.5 years. This factor gives investors a lot of visibility and security of the rental income that is likely to be generated, compared to the uncertainty of commodity prices that impact Rio Tinto shares.

One of the pleasing elements of this ASX dividend share is that it distributes 100% of its rental profits to investors, creating a rewarding distribution yield.

The business expects to pay a distribution per security of 25 cents in FY25, which translates into a forward distribution yield of 6.7%. I think this distribution can grow in future years thanks to the contracted rental increases with its leases with tenants, which are fixed increases or linked to inflation.

MFF Capital Investments Ltd (ASX: MFF)

For most of its existence, MFF Capital operated as a purely listed investment company (LIC) focused on high-quality global shares. However, it recently announced it would acquire the fund manager Montaka Global, giving it an operating side to its business.

I like the move to buy Montaka because it gives MFF a larger investment team of capable fund managers rather than relying on Chris Mackay, the managing director and portfolio manager. Any noticeable profit contribution from the Montaka funds management operations would be a useful bonus.

With large investments in businesses like Amazon, Microsoft, Alphabet, Visa and Mastercard, I think the core MFF Capital portfolio is well-positioned to perform in the long term.

In terms of being a great ASX dividend share, MFF has grown its annual ordinary dividend each year since 2018. It's expecting to pay an annualised dividend per share of 16 cents in FY25, which translates into a grossed-up dividend yield of 4.9% including franking credits.

The post Overinvested in Rio Tinto shares? Here are 2 alternative ASX dividend shares appeared first on The Motley Fool Australia.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has positions in Mff Capital Investments. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Mastercard, and Visa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool Australia has recommended Alphabet, Amazon, Mastercard, Mff Capital Investments, and Visa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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