2 ASX dividend shares to buy this month: experts

Here are two ASX dividend shares that could be good options for income investors.

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Key points

  • These two ASX dividend shares are rated buys and are expected to pay large dividends
  • Lynch is a large wholesaler and grower of flowers and potted plants
  • Rio Tinto is a major mining business with exposure to commodities like iron ore and copper

ASX dividend shares that are expected to pay sizeable dividends could be attractive investment options if they're good value today.

Who decides if they're good value? That's for each ASX investor to work out themselves. Meantime, brokers look at loads of businesses and rate whether they are buys or not.

Share price movements can change the attractiveness of a business in the eyes of experts.

With that in mind, here are two ASX dividend shares that are currently rated buys.

Lynch Group Holdings Ltd (ASX: LGL)

Lynch describes itself as Australia's leading vertically-integrated wholesaler and grower of flowers and potted plants.

Broker Ord Minnett says it's a buy with a price target of $3.30. That's a possible rise of about 50%.

The broker noted a recent update from Lynch, which included commentary regarding elevated costs of energy and logistics.

The company said that in Australia, revenue continues to "trend well" with a growth rate of at least 6% expected in the second half of FY22. It's actively engaging on pricing and range settings with customers to maximise value and manage the margin.

Costs have increased faster than the business has been able to recover through range and price management, with these adjustments typically lagging costs by between three to six months.

The China business was experiencing "strong" market conditions until the recent COVID-19 lockdowns.

Ord Minnett thinks the Lynch grossed-up dividend yield is going to be 7.9% in FY22 and 10.5% in FY23. The existing dividend policy is to pay out at least 50% of annual underlying net profit after tax (NPAT)

The ASX dividend share is expecting an easing of freight rates to reflect the increased airfreight capacity in the first half of FY23.

Rio Tinto Limited (ASX: RIO)

Rio Tinto is one of the largest mining businesses in the world. Its main earnings generator is iron ore, but there are other commodities that it has exposure to including bauxite, aluminium, copper, lithium, and titanium dioxide slag.

Broker Macquarie rates Rio Tinto shares as a buy with a price target of $135. That's a possible rise of about 15% for this ASX dividend share.

There are expectations that Rio Tinto will pay a grossed-up dividend yield of 15.8% in FY22 and 10.9% in FY23.

Rio Tinto doesn't have much control over the prices of the commodities it produces. However, it is in charge of production. In the first quarter of 2022, it saw a 15% quarter-on-quarter reduction in iron ore production. Aluminium and copper production were also down quarter-on-quarter.

Macquarie recognises that the current commodity prices are helping Rio Tinto, while copper could be a good growth avenue for the business with the Oyu Tolgoi project.

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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