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Key points
- The share prices of some attractive ASX dividend shares have dropped in recent weeks
- Fund manager GQG has seen its share price fall 13%, boosting the forecast dividend yield
- REIT Rural Funds keeps growing its distribution, but the share price has fallen 10% in the ASX share market correction
The ASX share market is seeing some relatively substantial declines, which are adding up. The S&P/ASX 200 Index (ASX: XJO) fell another 1.8% yesterday. It's down around 10% in just a few weeks. This is pushing up the potential yields of some ASX dividend shares.
When a share price declines, not only does the value potentially get better but the prospective dividend yield can also improve. For example, if a stock had a 5% dividend yield and then the share price fell 10%, the dividend yield would then be around 5.5%.
With that in mind, these two ASX dividend shares now could be attractive ideas:
GQG Partners Inc (ASX: GQG)
The GQG Partners share price fell 6.5% yesterday, which was on top of declines over recent months.
This is a fund manager that has produced attractive long-term outperformance for its fund investors and had been steadily growing its funds under management (FUM).
The business generates its profit predominately from management fees, rather than performance fees. In the 12 months to June 2021, performance fees represented just 2% of its total revenue.
In FY22, it's expecting to grow its pro forma net income after tax from $227.6 million to $247.3 million. That would be an increase of 8.6%. That estimate is based on an increase of funds under management (FUM) of 4.4% to finish FY22 at $92.5 billion. At FY22's halfway stage, FUM had grown to $91.2 billion. But that was before the recent market volatility.
In the first six months of FY22, it saw US$6.2 billion of net inflows.
It's expecting to target an annual dividend payout ratio of between 85% to 95% of distributable earnings.
The broker Morgans thinks the GQG share price is a buy, with a price target of $2.40. It thinks the ASX dividend share will pay a dividend yield of 7.9% in FY22 and 9.3% in FY23.
Rural Funds Group (ASX: RFF)
Rural Funds is a real estate investment trust (REIT) which specialises in owning farmland.
The agricultural REIT owns a diverse portfolio of different farms including cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).
One of the main aims of the REIT is to grow its distribution to investors by 4% per annum. It has been successful with with this target every year since it listed several years ago.
Unsurprisingly, the REIT has provided guidance for another 4% increase to the distribution for FY22. A payout of 11.73 cents per unit translates into a distribution yield of 4.2%. Part of this distribution growth is driven by organic rental increases which are included in its rental contracts.
The ASX dividend share continues to expand its portfolio with acquisitions. The latest acquisition was the purchase of 27,879 hectares of cattle and cropping properties. The four properties, collectively referred to as 'Kaiuroo' are located in central Queensland. It also bought 12,448ML of water entitlements.
The business has provided guidance that its FY22 adjusted funds from operations (AFFO), the net rental profit, will be 11.8 cents per unit. This is higher than the forecast distribution, despite the ongoing investing and property developments that it's doing.
