Coles and Future Gen: Two ASX dividend payers for August

Coles is one of Australia's largest supermarket operators, with hundreds of stores around the country plus a liquor division. Food is always in demand, which gives the business a defensive earnings base relative to more cyclical sectors. That defensive quality supports a resilient dividend.

Coles has grown its annual payout each year this decade. Few ASX blue-chip shares can say the same. The dividend growth story is underpinned by a growing national population and Coles' own investments in more efficient warehouses and supply chains.

Using the last two declared dividends, Coles offers a yield of about 4.3% including franking credits.

The combination of a rising payout and defensive earnings makes Coles a candidate for income-focused portfolios.

What to watch

Both shares have the benefit of franking credits, which boost the after-tax return for Australian resident investors. Future Generation's yield is significantly higher, but it comes from a portfolio of equities that will fluctuate with the market. Coles' yield is lower but the underlying business is more stable.

Neither stock is immune to a market downturn, but their track records on dividend growth suggest management teams that prioritise shareholder returns.

The next test for Coles will be its full-year results, due in late August. Future Generation updates its portfolio holdings quarterly, with the next scheduled release in October.