ASX dividend shares can offer attractive opportunities, according to experts.
They reckon it’s possible for a business to grow its profit and/or underlying value over the long term while also paying attractive dividends to investors.
Experts have made projections on two businesses expected to pay large dividend yields in the coming years. Let’s check them out.
Nick Scali Limited (ASX: NCK)
Nick Scali is one of the larger furniture retailing businesses on the ASX. It operates through two different brands – Nick Scali and Plush-Think Sofas.
Broker Citi currently rates Nick Scali as a buy with a price target of $17.60. That implies a possible rise of around 60%.
Citi thinks that Nick Scali will pay a grossed-up dividend yield of 9.9% in FY22 and 10% in FY23.
One reason for Citi’s positivity is the ASX retail share’s healthy-looking order book.
Since the start of the year, the Nick Scali share price has fallen by around 30%, which increases the prospective dividend yield.
Nick Scali is working on its online sales, which come with an elevated earnings before interest, tax, depreciation and amortisation (EBITDA) margin. In the first six months of FY22, Nick Scali generated $13.7 million of online revenue, with an incremental earnings before interest and tax (EBIT) contribution of $8 million.
The company also wants to grow its store network over the long term, from 108 in December 2021 to between 176 and 186 stores.
Management also sees opportunities in the Plush acquisition with supply chain synergies and the store rollout.
Charter Hall Long WALE REIT (ASX: CLW)
This is real estate investment trust (REIT) owns a diversified portfolio across a number of real estate sectors. The thing that links them all together is that the properties have long-term rental contracts, which helps the weighted average lease expiry (WALE).
Those properties are spread across sectors like office, industrial, retail, agri-logistics and telecommunication exchanges. Charter Hall says that the focus is on key defensive tenant industries that are resilient to economic shocks.
The ASX dividend share has several major tenants, including Endeavour Group Ltd (ASX: EDV), federal and state government agencies, Telstra Corporation Ltd (ASX: TLS), BP, Inghams Group Ltd (ASX: ING), Coles Group Ltd (ASX: COL), David Jones, Metcash Limited (ASX: MTS) and Arnott’s Group.
In the FY22 half-year result, it finished with a WALE of 12.2 years, providing “long-term income security”.
For FY22, it’s expecting to achieve operating earnings per share (EPS) of no less than 30.5 cents, reflecting growth of at least 4.5%. This would be a distribution of at least 5.75%.
Charter Hall REIT is currently rated as a buy by the broker Citi, with a price target of $5.71. The broker thinks that the REIT could pay a distribution of 5.8% in FY23.