ASX dividend shares with high yields could be investment opportunities in May 2022 according to analysts.
Businesses that are expected to pay higher dividends compared to typical ASX shares could be a way to boost investment income at a time when interest rates are still low.
Paying a dividend doesn't automatically make a business worth owning, but analysts like the valuations of these two businesses:
Charter Hall Long WALE REIT (ASX: CLW)
This is a real estate investment trust (REIT). It owns a variety of commercial properties which are leased out to tenants that are viewed as resilient. It's invested across office, industrial, retail, agri-logistics and telco exchange properties.
It's rated as a buy by the broker Morgan Stanley with a price target of $5.85. That implies a possible double-digit capital return over the next year.
The broker is aware that rising interest rates could lead to higher costs for the business. However, the ASX dividend share could benefit from the CPI-linked rental contracts, which could offset the higher interest costs.
Morgan Stanley thinks that Charter Hall Long WALE REIT will pay a dividend yield of 5.9% for FY22 and 6.1% in FY23.
The high yield ASX dividend share has two key strategies. Number one is: "provide investors with stable, secure income and targeting income and capital growth through exposure to long WALE properties." Number two is: "own high quality real estate on long term leases with strong tenant covenants."
At 31 December 2021, its occupancy rate was 99.9% with a weighted average lease expiry (WALE) of 12.2 years.
Centuria Office REIT (ASX: COF)
This is another REIT. As the name suggests, it specialises in office properties.
The broker Morgans rates the business as a buy, with a price target of $2.50, implying a double-digit upside for the Centuria Office REIT share price. In the FY22 half-year result, the ASX dividend share reported that its net tangible assets (NTA) per unit increased to $2.49. It was the discount to the NTA that Morgans was attracted to.
Centuria Office REIT recently announced its FY22 third quarter update. It said that its portfolio occupancy increased to 94.1% as at 31 March 2022, with a weighted average lease expiry (WALE) of 4.1 years.
In that quarterly update, it said that it had exchanged contracts to sell 131 Grenfell Street in Adelaide for $20.9 million, which was at a 10% premium to the book value.
In FY22, the high yield ASX dividend share is expecting to generate 18.3 cents per unit of funds from operations (FFO), which is essentially the net rental profit. It is expecting to pay a distribution of 16.6 cents per unit in FY22. That's a yield of 7.5% for FY22.
In FY23, Morgans thinks that Centuria Office REIT is going to pay a distribution of 17 cents per unit. That translates into a forward distribution yield of 7.7%.
