Some ASX dividend shares offer quite large income yields and have been growing underlying earnings as well.
COVID-19 provided plenty of impacts and volatility during FY21. But there are some businesses that are expected to report large shareholder payouts in FY21 and FY22.
Here are two that may be candidates as dividend ideas:
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Charter Hall Long WALE REIT (ASX: CLW)
This is one of the larger real estate investment trusts (REITs). It has a market capitalisation of around $3 billion according to the ASX.
It is invested across a variety of different property sectors, but the overarching theme is that the ASX dividend share aims to find quality tenants that will sign up to long-term leases.
Charter Hall Long WALE REIT is invested in a number of different sectors including 'long weighted average lease expiry (WALE) retail', industrial, office, social infrastructure and agri-logistics.
To be more specific, its portfolio income exposure is split as follows: government (20%), telecommunications (15%), grocery and distribution (14%), fuel and convenience (12%), pubs and bottle shops (10%), food manufacturing (9%), waste and recycling (2%) and 'other' (18% – which includes Bunnings).
It also has a number of high-quality tenants like Telstra Corporation Ltd (ASX: TLS), BP, Endeavour Group Ltd (ASX: EDV), Inghams Group Ltd (ASX: ING), Coles Group Ltd (ASX: WES), David Jones and Metcash Limited (ASX: MTS).
The ASX dividend share recently made some more acquisitions, which included spending $135.2 million on a 33.3% tenants in common title interest in the Myer Holdings Ltd (ASX: MYR) Bourke Street Mall property in the Melbourne CBD. Those combined acquisitions had a passing yield of 5.1% and a long WALE of 11.2 years.
With a 100% distribution payout ratio, it's expecting FY21 operating earnings per share (EPS) of 29.2 cents – that represents a distribution yield of 6%. Operating EPS is then expected to grow by another 4.5% in FY22.
It's currently rated as a buy by Citi with a price target of $5.30.
Adairs Ltd (ASX: ADH)
Adairs is one of the leading homewares retailers on the ASX.
One of the main ways that it is increasing its market share is by rapid online sales growth.
In the first half of FY21, total sales were up 34.8% to $243 million. Group online sales were $90.2 million, being 37.1% of the total. Adairs online sales increased by 95.2%, whilst Mocka sales (which is completely online) went up 44.4% to $28 million.
The company has been working on its gross profit margin, which saw an increase of 500 basis points in the first six months of FY21, the underlying Adairs gross profit margin improved 690 basis points to 67.8%.
This strong improvement in the margin allowed the company to grow its underlying group earnings before interest and tax (EBIT) by 166% to $60.2 million. Statutory net profit after tax (NPAT) grew 233.4% to $43.9 million and EPS came in at 25.9 cents. This allowed the board to declare an interim dividend of 13 cents per share.
The ASX dividend share has a number of initiatives to grow further. It wants to continue improving the Adairs online offering, improve the Mocka market share in Australia, upsize its stores and finish its new national distribution centre.
According to Commsec, Adairs is valued at 11x FY22's estimated earnings with a forward grossed-up dividend yield of 9.4%.
