Brokers rate these 2 ASX dividend shares as buys

These 2 ASX dividend shares are rated as buys by brokers, including the REIT Growthpoint Properties Australia Ltd (ASX:GOZ).

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There are quite a few ASX dividend shares that brokers rate as buys at the moment.

Good dividend income is in high demand with how low interest rates are right now. Indeed, the official cash rate of the Reserve Bank of Australia (RBA) is almost at 0%.

ASX dividend shares could be the answer, but there are only a certain number that are worth buying according to those brokers.

Here are two of them:

Growthpoint Properties Australia Ltd (ASX: GOZ)

Broker Credit Suisse currently rates Growthpoint as a buy, with a share price target of $3.54 for the property business.

Growthpoint has a portfolio of 57 properties which is valued at more than $4 billion. Those buildings are either industrial or office properties. The overall portfolio has a weighted average capitalisation rate of 5.5%, with a weighted average lease expiry (WALE) of 6.2 years.

The ASX dividend share's portfolio has an occupancy rate of 95%, up from 93% to 30 June 2020. Around 97% of the portfolio is leased to government, listed or large organisations. Some of those tenants include Woolworths Group Ltd (ASX: WOW), Linfox, the Australian government, Bank of Queensland Limited (ASX: BOQ), Samsung, Australian and New Zealand Banking Group Ltd (ASX: ANZ), Country Road Group and Wesfarmers Ltd's (ASX: WES) Bunnings.

Its net tangible assets (NTA) is $3.82, which means the last closing Growthpoint share price was at a 15% discount. It announced a buyback to buy up to 2.5% of its issued capital to benefit the funds from operations (FFO) and NTA per security.

In FY21 it's expecting to generate FFO per security of 25.2 cents to 25.5 cents. Its FY21 distribution guidance is 20 cents, which is a FY21 yield of 6.1%.

Adairs Ltd (ASX: ADH)

Adairs is a home furnishings ASX dividend share. It's currently rated as a buy by Ord Minnett with a price target of $4.50.

The broker is attracted to Adairs by its e-commerce growth, improvements to its stores and the growing presence of Mocka.

Adairs reported strong double digit growth in the first half of FY21 with sales growth of 34.8% and like for like sales growth of 32.4%. Online sales jumped 163.2% to $90.2 million with COVID-19 impacts, representing 37% of group sales. The last twelve months of online sales amounted to $180.2 million, being 37% of total sales. It also has over 900,000 people in its membership programme.

The gross profit margin increased by 545 basis points to 66.1%, which helped underlying earnings before interest and tax (EBIT) grow by 166% to $60.2 million. The EBIT margin almost doubled year on year to 24.8%.

Adairs has a number of initiatives to drive the business further. It's investing in its digital channel. The ASX dividend share thinks that there's a good opportunity for Mocka in Australia as brand awareness grows – it only has a small market share, for now.

Looking at its stores, it wants to make its stores bigger, which could increase the profit contribution from its stores by more than half.

It's also building a new DHL-operated national distribution centre in Melbourne, which is expected to be operational in the first quarter of FY22. This will generate savings of $3.5 million per annum once fully operational.

In the first seven weeks of the second half FY21, it had grown total sales by 25%, with Adairs online sales growing by 65.9%. It expects to open one or two net new stores and upsize three or four stores across ANZ in the second half of FY21.

Ord Minnett thinks that Adairs will pay a dividend of $0.28 per share in FY21, translating to a grossed-up dividend yield of 10.9%.

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of Wesfarmers Limited and Woolworths Limited. The Motley Fool Australia has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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