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2 ASX dividend shares rated as strong buys by brokers

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The two ASX dividend shares in this article are rated as buys by brokers and they offer attractive potential yields.

Just because a business pays a dividend doesn’t mean that it’s automatically worth owning. Some yields can be traps if a dividend cut is incoming.

However, the below two businesses are expected to pay good dividends and potentially see good capital growth over the next 12 months:

Aurizon Holdings Ltd (ASX: AZJ)

Aurizon is Australia’s biggest rail freight operator and it’s also one of the larger companies on the ASX.

Every year, the company’s trains carry hundreds of millions of tonnes of commodities for domestic and international markets.

It’s currently rated as a buy by at least four brokers, including Morgans which has a price target of $4.56 on the ASX dividend share.

At the current Aurizon share price, Morgans thinks that the business will pay a partially franked dividend yield of 7.4%.

In the FY21 half-year result, it saw a 2% decline of revenue to $1.5 billion, a slight decline of underlying earnings before interest and tax (EBIT) and underlying net profit after tax (NPAT), but a 22% drop of statutory NPAT to $267 million and a 18% decline of statutory earnings per share (EPS) to 14.1 cents.

The half-year dividend was grown by 5% to 14.4 cents. The coal price has seen a recovery in recent months, so this may be able to help future earnings.

Super Retail Group Ltd (ASX: SUL)

Super Retail is a large retailer with several businesses including BCF, Macpac, Rebel and Supercheap Auto.

The ASX dividend share is currently liked by at least four brokers at the moment, including Credit Suisse which has a price target for the business of $14.64.

Super Retail generated large profit growth in the first six months of FY21 off the back of strong sales growth. Total group sales went up 23% to $1.78 billion, with online sales growth of 87% to $237.4 million.

Operating leverage was on display with the profit lines growing quickly. The segment EBIT margin went up from 6.4% to 14.4%. This helped underlying NPAT rise by 139% to $177.1 million and statutory NPAT grew by 201% to $172.8 million.

The board of Super Retail decided to pay an interim dividend of 33 cents per share. Credit Suisse is expecting the ASX dividend share to pay a dividend of 64 cents per share, which translates to a grossed-up dividend yield of 7.6%.

In the first seven weeks of the second half of FY21, Super Retail has seen like for like sales growth of 30.5%. Management expect to revert to normal levels of promotional activity in the second half as inventory levels are restored. Expenses are also expected to catch up on projects deferred during COVID-19.

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Returns As of 15th February 2021

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia has recommended Aurizon Holdings Limited. 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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