ASX passive income shares could be the right investment for investors who are nervous at the moment. The US tariff trade war has raised uncertainty and hurt share prices.
Some growth shares may not grow earnings as fast in the shorter-term. This appears to be impacting how much investors are willing to pay for those businesses, such as US tech giants.
At the moment, US tariffs seem to be here to stay, though who knows what President Trump will decide to do next?
With that in mind, I'll explain why it could make sense to invest in ASX passive income shares.
Resilient earnings and payments
Businesses paying dividends seem like attractive investments to me. If a business has an appealing dividend yield, that tells me a few things.
First, it's making a profit, and the board of directors are comfortable enough with the financial position (and outlook) of the company to send out some of the generated profit to investors.
Second, if that business has a history of paying a similar (or growing) dividend, then it shows the business has demonstrated its consistency.
Third, solid dividend payers making resilient profits may also mean smaller hits to their share prices during bear markets. I think we've already seen evidence of lower volatility in the last few weeks for certain companies.
Real returns
Share prices change every trading day as various buyers and sellers transact at different prices. Our returns 'on paper' change all the time – they have likely fluctuated substantially over last few weeks.
When a business pays a dividend, investors are getting a 'real' return paid to them. During uncertain times like this, it could be pleasing to see money hitting the bank. We don't need to worry (too much) about share prices with ASX passive income shares because we can focus on the payments coming through and ride out the market volatility.
With businesses that don't pay dividends, we're reliant on their share prices going up to make returns.
RBA rate cuts?
The Reserve Bank of Australia (RBA) has already cut the official cash rate by 25 basis points (0.25%) in Australia and there is plenty of market commentary that suggests the RBA is likely to reduce rates again this year.
If the RBA does reduce rates, I think that could make ASX passive income shares more appealing compared to 'safe' rate-sensitive choices like savings accounts, term deposits and bonds.
Further rate cuts by the RBA could see investors search for yield and possibly push up share prices of dividend-paying businesses. We saw this effect significantly play out during the COVID era of very low interest rates.
If share prices do rise, this could push down the dividend yields. So, I'd rather invest now and lock in those better yields.
Which ASX passive income shares I'd buy
Profit growth and dividends are not guaranteed, but I'll point out a few ASX shares.
There's Australia's leading telecommunications business Telstra Group Ltd (ASX: TLS), energy infrastructure business APA Group (ASX: APA) and diversified investment business Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
I believe there's a great chance each of those businesses can deliver profit and passive income growth for investors.
The post Why ASX passive income share investing makes so much sense in 2025 appeared first on The Motley Fool Australia.
Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Apa Group, Telstra Group, and Washington H. Soul Pattinson and Company Limited. 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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