There are some smaller ASX dividend shares out there that have large dividend yields.
A dividend yield isn’t based on the size of the business, but it’s about the dividend payout ratio and the valuation of the company.
These two businesses have relatively small market capitalisations, but higher-than-normal dividend yields:
360 Capital REIT (ASX: TOT)
This is a real estate investment trust (REIT) that’s operated by 360 Capital Group Ltd (ASX: TGP).
360 Capital REIT invests in a wide range of real estate-based investment opportunities. Before COVID-19 it had been focusing on making real estate loans.
However, at the moment it is mostly investing in other real estate businesses. For example, it has invested in Peet Limited (ASX: PPC) and Irongate Group (ASX: IAP). 360 Capital REIT has also entered into a 50% equity partnership with PMG Group, a New Zealand based diversified commercial real estate funds management business.
PMG manages five unlisted funds, three single-property syndicates, with 42 properties and NZ$665.7 million of funds under management (FUM).
360 Capital said this partnership provides it with an investment in a growing funds management platform with a long track record and diversification through exposure to the New Zealand real estate market. It gives the company the opportunity to earn fee income from funds management and underwriting activities.
The ASX dividend share has a forecast FY21 distribution guidance of 6 cents per security, this translates into a distribution yield of 6.7%.
Pacific Current Group Ltd (ASX: PAC)
Pacific Current is a company that invests in fund managers across the globe and helps them grow with expertise and capital.
It’s invested in a number of different managers and they are steadily growing their funds under management (FUM), which is growing management fees.
In the recent FY21 half-year result, Pacific Current Managing Director CEO and chief investment officer Mr Paul Greenwood explained the benefit of this:
As you look at these results you will see that more of PAC’s earnings are coming from management fees, which are more repeatable than performance fees or commission revenues. This means that the organic profitability of the business continues to grow nicely, and we expect this trend to continue.
Despite the strengthening of the Australian dollar against the US dollar, management fee revenue grew 10% and operating expenses fell 24%.
Pacific Current also recently invested into Astarte Capital Partners which is based in London and it’s focused on private markets real asset strategies. The ASX dividend share said this investment has the potential to become one of its larger investments in the future. It will receive approximately 40% of net income from this investment.
It’s going to continue to focus on finding private capital asset management outfits with unique business models operating within niche market segments.
The company is expecting fundraising to accelerate through the rest of the 2021 calendar year and into 2022. It’s also expecting to make at least one more investment in FY21.
It has a trailing grossed-up dividend yield of 9.1% at the current Pacific share price.