2 top ASX dividend shares to think about

Ansell is one ASX dividend share, but it has taken a dive recently.

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Key points

  • These are two ASX dividend shares that could be worth a closer look
  • Ansell is a global manufacturer of protective gear
  • Rural Funds is an agricultural real estate investment trust

Many investors are keen to hunt for ASX dividend shares on the Australian Stock Exchange.

As always, some businesses are thriving while others are experiencing share price declines.

However, a share price and a dividend can behave differently. Businesses can often have the capability of providing a fairly consistent payout to investors despite fluctuations in the share price.

With that in mind, here are two ASX dividend shares to think about:

Ansell Limited (ASX: ANN)

Ansell describes itself as a world leader in providing superior health and safety protection solutions. The company has two main business segments: industrial and healthcare. It claims to be the market leader with operations across the world and customers in more than 100 countries. One of its main products is protective gloves.

The company recently declared an interim dividend of US 24.25 cents per share, representing a dividend payout ratio of around 40%. This was consistent with the company’s dividend policy.

Ansell’s last two dividends amount to a dividend yield of 3.7%.

Since the start of 2022, the Ansell share price has fallen by 23%.

The company’s FY22 half-year result included some mixed numbers.

Sales increased by 7.6% to $1 billion, with the healthcare division seeing organic growth of 14.8%. Surgical and life sciences continued to see revenue growth, however, exam and single-use sales volumes dropped and pricing reduced.

The industrial unit saw organic sales decline by 2.9%. A “positive” performance from mechanical was more than offset by lower sales of chemical protective clothing due to a reversal of COVID-19 related benefits.

Ansell’s earnings before interest and tax (EBIT) fell 24.3% in the half-year. It was impacted by factors including having to sell high-cost examination and single-use inventory from outsourced suppliers at lower prices, COVID-related manufacturing disruptions, and higher freight costs.

The ASX dividend share is expecting some improvement in the second half, with outsourced supplier costs expected to reduce. It’s also expecting COVID manufacturing impacts to be less in the second half of FY22 compared to the first half.

In the longer term, the company is expecting volume growth as end-user and distributor inventories normalise. It also said “longer-term margins should benefit with greater contribution from in-house differentiated manufacturing”.

Ansell also said that it expects continued favourable demand conditions for the surgical and life science businesses and success with strategic growth initiatives for the industrial segment.

Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT). It owns a diversified portfolio across different sectors including cattle, almonds, macadamias, vineyards, and cropping (cotton and sugar).

The business has a key goal of growing its distribution to investors by at least 4% per annum. It has been successful with this goal each year since it listed several years ago.

One of the drivers of increasing distributions from the ASX dividend share is its organic rental increases that are built into the contracts. Some contracts have fixed rental increases, while others are linked to CPI inflation. Some of these contracts have periodic market reviews.

Another way that Rural Funds can grow its distribution is through investing in productivity improvements at the farms. Examples of that include increased water access, improved irrigation, orchard development, and grazing areas.

In FY22, it’s expecting to pay a distribution of 11.73 cents per unit. That translates into a distribution yield of 3.8% for FY22.

Motley Fool contributor Tristan Harrison owns RURALFUNDS STAPLED. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended RURALFUNDS STAPLED. The Motley Fool Australia has recommended Ansell Ltd. 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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