In this era of very low interest rates, it’s no wonder that investments that have higher yields might be interesting to some investors. This article is about two ASX dividend shares.
There are some ASX dividend shares that have relatively high dividend yields.
Just because a company pays a dividend doesn’t automatically make it worth owning. However, these two may be particularly interesting over the coming years:
Nick Scali Limited (ASX: NCK)
Nick Scali is one of the largest furniture retailers across Australia and New Zealand.
At the time of the FY21 result, it had 61 showrooms. The company continues to assess new opportunities in line with its long-term network target of 85 showrooms.
The business is also looking to grow with online sales. In FY21, its online written sales orders were $18.3 million, compared to $3 million in FY20. The earnings before interest and tax (EBIT) contribution from the online channel was $8.8 million compared to $0.6 million in FY20.
In FY21, its total sales grew 42.1% to $373 million, whilst underlying net profit after tax (NPAT) doubled to $84.2 million.
The ASX dividend share paid a full year dividend of $0.65 per share. That equates to a trailing grossed-up dividend yield of 6.4%.
Nick Scali is rated as a buy by Citi, with a price target of $16.80. One of the reasons for the broker’s positivity about the business is its recent announcement that it’s buying Plush. In FY21, Plush made $160 million of revenue with underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $27 million.
Citi thinks the Nick Scali share price is valued at 16x FY23’s estimated earnings with a FY23 grossed-up dividend yield of 6.7%.
Centuria Industrial REIT (ASX: CIP)
This ASX dividend share is a real estate investment trust (REIT) that owns a portfolio of industrial properties. Indeed, it aims to be Australia’s leading domestic pure play industrial REIT.
Its goal is to deliver income and capital growth to investors.
The portfolio is diversified by geography, sub-sector, tenants and lease expiry. The sectors it’s invested in are: manufacturing, distribution centres, transport logistics, data centres and cold storage. Centuria Industrial REIT currently has around 75 properties, with a portfolio occupancy of 97.4% and a weighted average lease expiry (WALE) of nine years.
It’s regularly expanding the portfolio. For example, it recently settled on the $200 million acquisition of a distribution centre at 56-88 Lisbon Street, Fairfield, New South Wales.
In FY22, it is expected to generate funds from operations (FFO) per security of at least 18.1 cents. The ASX dividend share is expected to pay a distribution of 17.3 cents per unit in FY22 – that translates to a forward distribution yield of around 4.6%.
The manager of Centuria Industrial REIT, Jesse Curtis, said:
Centuria Industrial REIT continues to benefit from macro trends that increase demand for last mile industrial space within close proximity to large population catchments. Centuria Industrial REIT’s industrial portfolio is skewed towards these infill markets where increased tenant demand and limited supply opportunities is driving upward pressure on market rents.
It’s currently rated as a buy by the broker Macquarie Group Ltd (ASX: MQG), with a price target of $4.22. In FY23, Macquarie thinks the ASX dividend share will pay a distribution of 18.40 cents per unit. That would be a yield of 4.9%.