There are a number of ASX dividend shares that have dividend yields of more than 4%.
The Reserve Bank of Australia (RBA) has pushed the official interest rate down to just 0.1%, which makes it difficult to generate any meaningful income from interest.
Dividend yields from some shares are relatively quite a bit higher. These two businesses have dividend yields materially more than 4%:
Nick Scali Limited (ASX: NCK)
Nick Scali is one of the biggest furniture-selling businesses on the ASX. It imports over 5,000 of containers of furniture per year.
The company has been a beneficiary of the large amount of consumer spending that has occurred in Australia over the last year. This was evident in the company’s most recent result for the half-year to 31 December 2020 where sales increased by 24.4%.
Not only is the sales revenue continuing to increase, but profitability is increasing even faster. The gross profit margin went up by 180 basis points to 64%, whilst the earnings before interest, tax, depreciation and amortisation (EBITDA) and earnings before interest and tax (EBIT) margins both improved by 1,270 basis points to 35.2% and 33.6% respectively.
The ASX dividend share reported that its underlying net profit after tax grew 99.5% to $40.5 million and the underlying earnings per share (EPS) rose 99.5% to 50 cents. Operating cashflow before interest and tax rose 222.3% to $53.5 million.
This result allowed the company’s board to increase the interim dividend per share by 60% to 40 cents.
Brokers at Citi, which rate Nick Scali shares as a buy, think the company will pay an annual dividend of 80 cents per share, equating to a grossed-up dividend yield of 10%.
Centuria Industrial REIT (ASX: CIP)
As the name suggests, this is a real estate investment trust (REIT) which invests in and owns industrial property. It describes itself as Australia’s largest domestic pure play industrial property investment vehicle.
It owns 59 properties with a total value of $2.4 billion, which are in prime locations and situated close to important infrastructure.
The ASX dividend share owns manufacturing facilities, with tenants like Arnott’s and Visy. It has distribution centres with tenants such as Woolworths Group Ltd (ASX: WOW) and Australian Pharmaceutical Industries Ltd (ASX: API). The REIT owns transport logistics with tenants such as Australia Post and DHL. Centuria Industrial REIT also owns data centres, tenanted by Telstra Corporation Ltd (ASX: TLS), and it also owns cold storage facilities.
In terms of the geographical location of these buildings, 89% of the portfolio is weighted to the eastern seaboard. Occupancy currently sits at 97.7% with a weighted average lease expiry (WALE) of 9.8 years. Less than 8.5% of the portfolio has a lease expiry date within the next 18 months.
In terms of the balance sheet, it had a gearing ratio of 29.6% at the time of the half-year result.
For FY21, the ASX dividend share upgraded its funds from operations (FFO) – its rental profit – expectations to be no less than 17.6 cents per unit, with a distribution of 17 cents per unit. The guidance of an annual 17 cents per unit distribution equates to a current yield of 5.5%.
UBS currently has a buy rating on Centuria Industrial REIT with a share price target of $3.38.