There are a group of ASX dividend shares that are currently offering very high dividend yields compared to the overall market.
These are businesses that generally have a high dividend payout ratio and a modest valuation. High valuations push down prospective yields.
In a world where interest rates are exceptionally low, high dividend yields may be attractive.
Nick Scali Limited (ASX: NCK)
Nick Scali is a relatively large furniture business, with a market capitalisation of around $1 billion according to the ASX.
It’s currently rated as a buy by Citi. The broker points out that Nick Scali has a strong balance sheet that can help shareholder returns.
Indeed, the ASX dividend share recently confirmed that it is in non-exclusive discussions with Greenlit Brands about a potential deal to buy the Plush Sofas business.
Nick Scali said it actively considers acquisition opportunities to produce growth from time to time, if it makes strategic sense. It has to have the potential for synergies, have a good financial impact and create long-term for Nick Scali shareholders. If the deal goes ahead, it’ll be funded by cash and debt, but there’s no guarantee the deal would go ahead.
Its total written sales orders for the group continue to remain elevated, with growth of 50% in the third quarter. In April 2021, there was growth of 242% year on year when there were widespread store closures in FY20.
In FY21, Nick Scali is expecting earnings before interest, tax, depreciation and amortisation (EBITDA) to be approximately $120 million. Net profit after tax is expected to be in the range of $78 million to $80 million, an increase of between 85% to 90%.
Citi is expecting the FY22 dividend from Nick Scali to be 48.60 cents, which would translate to a grossed-up dividend yield of 5.6%.
The ASX dividend share has growth plans including expanding the store network, launching in adjacent product categories and improving its online offering.
Centuria Industrial REIT (ASX: CIP)
This is the largest pure play way to get exposure to industrial commercial property, in the form of a real estate investment trust (REIT).
Those properties are located in important metropolitan locations, with quality and diverse tenants.
The fund manager tries to provide capital growth and income for investors.
It recently spent another $86.1 million on three properties, being two distribution centres and a manufacturing property. Those assets come with an initial yield of 5% with a weighted average lease expiry of 5.8 years.
Prior to those acquisitions, in its revaluation update, the ASX dividend share said the pro forma net tangible asset (NTA) was $3.85 per unit. The portfolio had an occupancy rate of almost 99% with a WALE of close to 10 years.
Fund manager Jesse Curtis recently said:
Australia’s industrial real estate market remains a highly sought-after sector attracting investment demand from domestic and international capital. Within the past six months the market has seen elevated transaction volumes with major asset and portfolio sales setting new benchmarks…Strong sector tailwinds continue to provide long-term benefits to industrial real estate with e-commerce and onshoring increasing demand for quality industrial accommodation.
It’s currently rated as a buy by the broker Macquarie Group Ltd (ASX: MQG). The FY22 distribution is expected by the broker to be 18.3 cents per unit, which contributes to a forward distribution yield of 4.85%.