There are some ASX dividend shares that are expected to offer elevated levels of income compared to many other options.
A business isn't necessarily worth owning just because of the income. But analysts have rated the below companies as buys:
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Bank of Queensland Limited (ASX: BOQ)
BOQ is one of the larger banks in Australia. It's not quite as big as the big four ASX banks, but it is now a large challenger bank after the acquisition of ME Bank.
It is rated as a buy by the broker Morgans. The broker currently has a price target on the business of $10.80, which implies the analyst thinks the shares could rise by well north of 20% over the next 12 months.
The broker noted that BOQ is expecting continuing loan growth in FY22, with profit and dividend growth looking ahead beyond the current financial year.
On Morgans' numbers, BOQ shares are expected to pay a grossed-up dividend yield of 8.3% in FY22 and then a 9.3% yield in FY23. Looking at the expectation for FY23, the BOQ share price is valued at 9x FY23's estimated earnings.
In terms of what BOQ said about its outlook and expectations, it said that it remains focused on achieving sustainable profit growth. The bank is expecting above system growth in its BOQ and Virgin Money Australia brands, and a return to around system growth by the year end.
However, as Morgans noted, the ASX dividend share is expecting its net interest margin (NIM) to decline by around 5 basis points to 7 basis points as competition continues and the low interest environment remains.
Whatever happens next, BOQ said it will continue to maintain a prudent approach to provisioning, whilst have a strong capital position and the bank expects the common equity tier 1 (CET1) ratio to remain comfortably above 9.5%.
Telstra Corporation Ltd (ASX: TLS)
Telstra is another of the large ASX businesses to be rated as buys by a broker.
Morgans is one of the brokers that rates the telco as a buy. It currently has a price target of $4.55 on the business, suggesting a potential increase of the share price of approximately 15% over the next 12 months, if the broker is right.
Telstra itself has essentially committed to paying an annual dividend of $0.16 per share in the near-term, with a view to raising it as profits and franking credits allow. Morgans also thinks that the ASX dividend share will stick to the current level payout.
At the current Telstra share price, the expected dividends translates to a grossed-up dividend yield of 5.8%.
Morgans most recently noted the attractiveness of how the Digicel acquisition was set up.
Digicel is a telecommunications business that operates in the South Pacific, with strong market positions in countries like PNG, Fiji, Nauru, Samoa, Tonga and Vanuatu. In the year to 31 March 2021, Digicel generated US$431 million of service revenue, the majority of which came from PNG.
The acquisition was for a total price of US$1.6 billion, though Telstra is only contributing US$270 million of that. The Australian Government is contributing the rest of the US$1.33 billion through a combination of non-recourse debt facilities and equity-lie securities. Telstra will own 100% of the ordinary equity.
