Some ASX dividend shares are top ideas for income. They are capable of producing much bigger payments to investors than what someone can get from the bank in interest.
It's a good idea to make sure that the price you pay for a dividend share is good value, just like buying any other investment.
These two have compelling income potential:
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Premier Investments Limited (ASX: PMV)
Premier Investments has a forecast grossed-up dividend yield of 5.1% for FY21 according to Commsec.
This business is the owner of numerous retail brands including Peter Alexander, Smiggle, Just Jeans, Jay Jays and so on. It also has a sizeable stake of appliance business Breville Group Ltd (ASX: BRG).
Premier Investments has been a strong dividend payer for a number of years and it kept the dividends rolling despite all of the difficult COVID-19 impacts. It has been working hard on landlords to reduce their rents to reflect the new world we live in where there are more sales made online.
Online sales made up 20% of total sales for the first half of its FY21. It also contributed to a higher profit margin. Global retail sales only went up 7.2%, but online sales rose 61.3%. Premier's retail gross margin went up 286 basis points and the earnings before interest and tax (EBIT) margin increased by 1,308 basis points. This helped EBIT jump 88.5% to $237.5 million. Profit growth will help maintain and grow the dividend.
Global retail sales continue to grow for the ASX dividend share, with like for like sales up 32.1% in the first seven weeks of the second half. The gross margin improved by 379 basis points.
Premier's board decided to maintain the interim dividend at 34 cents per share. The board recognised there is still a lot of uncertainty with the global health crisis as well as the economic impacts.
Pacific Current Group Ltd (ASX: PAC)
Pacific currently has a trailing grossed-up dividend yield of 8.8%. This business is rated as a buy by the broker Ord Minnett. It has a price target of $6.70 on the ASX share.
What is Pacific? It partners and invests with global fund managers to help them grow with capital and expertise.
Some of its current investments includes GQG Partners, Astarte Capital Partners, ROC Partners, Victory Park Capital and Aether Investment Partners.
The ASX dividend share has a low forward price/earnings ratio according to Ord Minnett. The Pacific Current share price is valued at 11x FY21's estimated earnings.
Pacific continues to see an improvement of its underlying management profit. A benefit of funds management businesses is that they're scalable – they don't require much capital to add more funds under management (FUM) each year.
Total FUM at 31 December 2020 was $112.8 billion, an increase of 23.9% since 30 June 2002 after adjusting for the sale of Seizert. The non-Australian dollar denominated FUM saw a 40% increase from June to December.
Pacific Current also saw management fee revenue grow 10% and operating expenses decline by 24%. It was only because of the stronger Australian dollar and lower outperformance fees that caused Pacific's underlying net profit to decline by 13.4%.
