Fact: we all need food to live. I'm sure this revelation will come as no surprise for any reader out there. But this makes for useful knowledge when it comes to investing, because the companies that sell us what we need need have an intrinsic advantage. They never have to worry about their products becoming redundant or outdated. And that's a great thing from a dividend perspective.
With that in mind, here are 2 ASX dividend shares in the food space that have been rated as buys by analysts.
Collins Foods Ltd (ASX: CKF)
You might not have heard of Collins Foods – it's hardly a household name in Australia, to be fair. But the restaurant brands that it has a license to own or franchise in Australia certainly are. They are Kentucky Fried Chicken (KFC), Taco Bell and Sizzler.
Collins recently announced that the Sizzler brand would be discontinued in Australia due to the coronavirus pandemic, and it only has 13 Taco bells in Australia (most of which are in Queensland).
However, the 243 KFC restaurants throughout the country are Collins' real crown jewel. In its FY2020 earnings report, Collins told investors that Australians couldn't get enough of the Colonel, with KFC same-store sales up 3.5% over the year. That helped the company post an annual underlying earnings growth rate of 6.3%.
But Collins also pays a strong dividend. Its total payout in 2020 came in at 20 cents a share, which gives Collins a trailing dividend yield of 1.98% (2.83% grossed-up) on current prices.
Collins Foods has recently been rated as a 'buy' by analysts at Morgans, who expect Collins' restaurants will benefit from a return to normality following the release of an effective COVID-19 vaccine.
Coles Group Ltd (ASX: COL)
Coles is the second-largest grocer in Australia, behind Woolworths Group Ltd (ASX: WOW) and in front of Aldi and Metcash Ltd (ASX: MTS)'s IGA. The company reported revenue growth of 6.9% in its FY2020 earnings report, as well as a 7.1% increase in net profits after tax.
But dividend investors had something to smile about as well. Coles announced a fully franked, final dividend of 27.5 cents per share, which was an increase of 14.6% on 2019's final dividend. That means Coles has paid out 57.5 cents per share in dividends in 2020, giving the Coles share price a trailing dividend yield of 3.24% (4.63% grossed-up).
The Motley Fool's Everlasting Income service currently rates Coles as a 'buy'. The team at Everlasting Income like Coles' defensive revenue stream, as well as the company's strong brand and market position.
