Overinvested in BHP shares? Here are two alternative ASX dividend stocks

MotleyFool
08/26

Owning BHP Group Ltd (ASX: BHP) shares has been very rewarding for passive income investors in the last few years. ASX dividend stock investors have been showered with big dividend payments.

The BHP FY25 result wasn't thrilling, considering the dividend was reduced compared to FY24. That may be disappointing, but understandable considering the iron ore price fell during the year.

On a positive note, copper earnings increased, helping offset some of the iron ore pain.

For investors that have significant exposure to BHP, they may want to consider adding further diversification for their income by looking at other names. Some income-seekers may like more of their portfolio being less reliant on Chinese buying of resources.

Let's take a look at some compelling ASX dividend stock ideas.

Duxton Water Ltd (ASX: D2O)

Duxton Water is a unique business in terms of what it can offer investors. It owns a portfolio of water entitlements, offering a range of water supply options for farmers, including long-term entitlement leases, forward allocation contracts, and spot allocation supply.

It has grown its dividend every year in the last seven years, which has been much more consistent than BHP.

Duxton Water can generate distributable profit from lease income and growth in the value of the water entitlements.

At 31 July 2025, just over half of the entitlement portfolio was leased, with a weighted average lease expiry (WALE) of 3.7 years.

The ASX dividend stock also noted that major water storages remain at the lowest levels for this time of year since 2020. Duxton Water also said in its July 2025 update that it acquired several small parcels of lower Murray entitlements at attractive prices during the month.

The last two paid dividends come to a grossed-up dividend yield of 7.1%, including franking credits, at the time of writing.

Centuria Industrial REIT (ASX: CIP)

This is a real estate investment trust (REIT) that owns a portfolio of industrial properties across Australian cities. This area of the property market has a very low vacancy rate, which helps the business maintain a high occupancy rate and pushes up rental income.

There are a number of tailwinds for industrial properties, including rising adoption of e-commerce, stronger demand for refrigerated space (for food and medicine), significant demand for data centres, and so on.

The combination of rental income growth and falling interest rates is a powerful combination for the ASX dividend stock's ongoing rental profit. Rate cuts can both reduce the interest costs for the business and increase the underlying value of the properties.

In FY26, the business is expecting to grow its rental profit (funds for operations (FFO) per security) by 6% and the distribution per security could increase by 3% to 16.8 cents. At the current Centuria Industrial REIT security price, it translates into a distribution yield of around 5%.

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