Are these 2 ASX dividend shares buys in May 2022?

Here are two ASX shares that may be options for dividend income.

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Key points

  • These two ASX dividend shares are expected to keep the dividends flowing in FY23
  • Adairs is a leading homewares and furniture retailer
  • Brickworks is a building products manufacturer and property owner

The two ASX dividend shares in this article are businesses that aim to provide investors with dividend income. But could they be smart ideas to consider today?

There has been a lot of volatility on the ASX share market in recent months, amid the Russian invasion of Ukraine and market focus on inflation and interest rates.

Adairs Ltd (ASX: ADH)

Adairs is a homewares and furniture retailer. It sells products through three different brands – Adairs, Mocka, and Focus on Furniture.

According to CommSec, the current Adairs share price is valued at 7x FY23’s estimated earnings with a projected FY23 grossed-up dividend yield of 14.3%.

FY22 has seen the business hampered by COVID-19 – store closures had an estimated group earnings before interest and tax (EBIT) impact of $18 million to $20 million.

The ASX dividend share has a number of different strategies to grow profit into the future.

One tactic is to expand its floor area, which has a direct link to sales according to Adairs. In the first half of FY22, it opened two new homemaker stores and upsized four stores. Larger stores make more profit for the business. Adairs’ floorspace expanded by 8.6% in the previous 12 months.

Another plan is to grow its membership base, called Linen Lovers. In its FY22 half-year result Adairs said its membership rose by 10% in the prior 12 months.

Online sales growth is a focus for the business to be a leading omnichannel retailer. Total online sales for the half were 185% higher than in FY20. Online sales made up 43% of total group sales.

Adairs recently acquired Focus on Furniture. The ASX dividend share is transitioning to a new national distribution centre, which will make the business more efficient and save on annual expenses.

Brickworks Limited (ASX: BKW)

Brickworks is a diversified building products manufacturer. It provides several different product types including bricks, paving, precast, roofing and cement.

However, management points to two other assets that help provide the cash flow to fund a dividend that hasn’t been cut in over 45 years. Indeed, management is proud of the company’s history of paying and growing dividends.

The two other assets it owns are the investment in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares and a 50% share of an industrial property trust.

It owns 26.1% of the investment conglomerate that owns names in the portfolio like TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), New Hope Corporation Limited (ASX: NHC), Macquarie Group Ltd (ASX: MQG) and Commonwealth Bank of Australia (ASX: CBA).

Soul Pattinson is invested in a number of sectors including resources, telecommunications, banking, agriculture and financial services.

Regarding the industrial property trust, Brickworks says that it’s seeing unprecedented demand for its industrial property facilities. So, it is building properties “at pace” to keep up with demand.

As properties are completed, the rental income grows for the ASX dividend share. Brickworks points to land that can enable years of further development and growth.

At the current Brickworks share price, the estimate on CommSec shows the business trading with a FY23 grossed-up dividend yield of 4%.

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ADAIRS FPO, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended ADAIRS FPO, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Macquarie Group Limited and TPG Telecom 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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