2 ASX dividend shares rated highly by analysts

These 2 ASX dividend shares have been rated as compelling income options.

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A money jar filled with coins, indicating an investment return from an ASX dividend share

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Key points

  • Analysts have named some ASX dividend shares as buys
  • Simply paying a dividend is not enough to count as an attractive income stock
  • Both Adairs and BOQ look good value and could pay attractive yields

It can be hard to find investments that deliver a decent yield in the current environment. Some ASX dividend shares may be the answer.

However, just because a company pays a dividend doesn’t automatically make it a worth a buy. For example, Commonwealth Bank of Australia (ASX: CBA) is one of the most well-known and biggest dividend payers on the ASX. However, several brokers rate CBA as a sell.

That’s not the case with the following two ASX dividend shares:

Adairs Ltd (ASX: ADH)

Adairs is one of the leading retailers when it comes to homewares, furnishings and furniture.

It is currently rated as a buy by a few different brokers including Morgans and UBS. The price targets on Adairs are $4.80 and $5.90 respectively, which suggests upside of 25% and 53%.

Both of these brokers are also predicting a large dividend in FY23 from Adairs. At the current Adairs share price, in FY23 Morgans thinks the company is going to pay a grossed-up dividend yield of 10.8% and UBS is expecting a FY23 grossed-up dividend yield of 11.1%.

The brokers like that Adairs has bought Focus on Furniture for a decent price which will add to earnings per share (EPS) for the longer-term.

Adairs thinks that Focus has growth opportunities from a national store roll out, online growth and category and range expansion.

The existing Adairs business is growing online sales significantly, becoming more efficient and growing profitability.

The ASX dividend share is also working on opening more larger format stores which are substantially more profitable than smaller ones.

Morgans thinks that Adairs shares are valued at 9x FY23’s estimated earnings.

Bank of Queensland Limited (ASX: BOQ)

BOQ is currently rated as a buy by six brokers, including Macquarie.

Macquarie is expecting that the regional bank is going to pay a grossed-up dividend yield of 8.3% in FY23. The price target by the broker on the bank is $10, which suggests a potential upside of more than 20% this year.

The broker thinks that the bank is doing pretty well in the current environment consider banks like CBA are warning that its net interest margin (NIM) facing difficulties with competition and the low interest rate environment.

At the bank’s annual general meeting (AGM), it reconfirmed FY22 guidance of at least 2% jaws, with expenses down 1% for the year.

The ASX dividend share says that it’s maintaining a strong capital position and sound asset quality. It’s committed to delivering long-term shareholder value through sustainable profitable growth.

A key focus for BOQ at the moment is integrating ME Bank. Work is underway to return ME Bank to growth, with application volumes up 62% in the first quarter in FY22 compared to the FY21 average. Net growth was achieved for the month of November. Synergies are being accelerated and expected to be delivered by the end of FY23.

Macquarie puts the BOQ share price at 11x FY23’s estimated earnings.

Should you invest $1,000 in BOQ right now?

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended ADAIRS FPO. The Motley Fool Australia owns and has recommended ADAIRS FPO. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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