Sometimes, businesses can have particularly high dividend yields if the price/earnings (P/E) ratio is relatively low.
However, it takes more than just a dividend to make an investment a good idea. Experts have identified these two businesses as attractive options at their current prices:
Nick Scali Limited (ASX: NCK)
Nick Scali is one of the largest retailers of furniture in Australia. It operates the Nick Scali range of stores but it also recently acquired the Plush-Think Sofas business.
It's currently rated as a buy by the broker Macquarie. The price target is $12.70, implying a possible rise of around 70% over the next year.
One of the key reasons that Macquarie likes the ASX 300 dividend share is that the large order book is expected to reduce to a more normalised level. It also likes the growth potential of Plush to add to the Nick Scali business.
Nick Scali said that some of the synergies it can extract from Plush are "aligned distribution, supplier consolidation and shared corporate infrastructure". Some of the areas of growth that management has identified in Plush include store network expansion and enhanced group buying power.
Nick Scali thinks that gross profit margins can rise by replacing half of the range with new models, having a wider range of products to generate additional volume at better margins, and utilising capacity within the company's delivery network.
Macquarie thinks that Nick Scali will pay a grossed-up dividend yield of 10.4% in FY22 and 9.6% in FY23.
Tassal Group Limited (ASX: TGR)
Tassal is one of the largest prawn and salmon producers in Australia.
It's currently rated as a buy by the broker Credit Suisse, with a price target of $4. That implies a possible rise of more than 10% over the next year.
While Tassal faces higher costs in this inflationary environment, the ability to pass those cost rises onto customers (and then some) can help maintain and grow margins. However, Credit Suisse has slightly reduced how much volume it's expecting Tassal to sell to account for higher salmon prices.
In a recent shareholder presentation, the ASX 300 dividend share said:
Investments in our infrastructure have delivered scale in salmon and growing scale in prawns, which together with pricing and mix optimisation, will drive growth in cash flows and shareholder returns.
Tassal said that salmon price re-rating will "drive stronger margins". It's looking to "optimise" its prawn operations, with further growth self-funded and only when market conditions dictate.
The company thinks there are favourable trends driving global demand higher. There is "low or no growth in supply globally for calendar years 2022 and 2023". It also pointed to international market pricing being supportive of margin increases heading into FY23.
Credit Suisse thinks Tassal is going to pay a dividend yield of 4.6% in FY22 and 4.9% in FY23.