2 buy-rated ASX dividend shares for income: experts

These 2 ASX dividend shares are rated as buys by experts.

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Key points

  • Here are two ASX dividend shares that are expected to be good options for dividends, while being attractively valued
  • One pick is industrial property business Centuria Industrial REIT
  • Diverse supplier and hardware business Metcash is another income candidate

Experts have rated some leading ASX dividend shares as buys. These are businesses that are both good value according to brokers and are projected to provide a good source of income for investors.

Not every business that pays a dividend is automatically an attractive ASX dividend share. The valuation can influence whether a business may be able to achieve good capital growth or not.

Here are two businesses that brokers like right now:

Centuria Industrial REIT (ASX: CIP)

This real estate investment trust (REIT) is a large pure-play business when it comes to industrial property in Australia.

It’s currently rated as a buy by the brokers at Macquarie, with a price target of $4.27. That implies a possible double-digit return for the Centuria Industrial REIT share price over the next year.

Macquarie expects that Centuria Industrial REIT will pay a distribution yield of 4.8% in FY22 and 5.2% in FY23.

At the end of the third quarter of FY22, its portfolio occupancy was 98.5%, while the weighted average lease expiry (WALE) was 8.7 years.

The fund manager of the ASX dividend share, Jesse Curtis, explained the tailwinds that the business is currently seeing:

Centuria Industrial REIT continues to harness the strong tailwinds of Australia’s industrial real estate market having delivered another strong quarter. Portfolio leasing remains robust with strong tenant customer demand evidenced by leasing volume achieved and high occupancy across the portfolio. Centuria Industrial REIT’s assets are strategically located in markets with low vacancy rates and limited supply and are positioned to benefit from rising rents.

The increasing trend of onshoring and reshoring supply chains to ensure business continuity, together with continued adoption of e-commerce, has further accelerated demand for last mile, infill locations that are in close proximity to densely populated areas.

Metcash Limited (ASX: MTS)

Metcash is a diverse business. It supplies IGA supermarkets and various liquor stores including Cellarbrations, The Bottle-O, IGA Liquor, Duncans, and Thirsty Camel. It also owns hardware businesses including Mitre 10, Home Timber & Hardware, and Total Tools.

It’s rated as a buy by the broker UBS with a price target of $5.

The broker noted the recent long-term supply agreement with Australian United to supply its national network of supermarkets and convenience stores, including its Foodworks supermarkets, for another five years.

Sales to Foodworks in FY21 accounted for around $900 million of the total sales of the $9.4 billion Metcash food pillar.

The ASX dividend share has committed to a dividend payout ratio of around 70% of underlying net profit after tax (NPAT). The FY22 interim dividend was increased by 31% to 10.5 cents. Metcash says it has a “strong focus on shareholder returns”.

On UBS’ numbers, the Metcash share price is valued at 16x FY22’s estimated earnings.

The broker thinks that FY22 Metcash grossed-up dividend yield is going to be 5.5% and in FY23 it will be 5.8%.

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. has no position in any of the stocks mentioned. 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 Scott Phillips.

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