Looking to buy ASX dividend shares? Here are 2 that experts rate highly

Telstra is one of the expert picks for solid share price growth and income returns.

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Key points

  • What could be better than an ASX share offering income AND growth? 
  • Telstra is one broker pick -- it’s Australia’s biggest telecommunications business
  • Universal Store, which sells apparel aimed at younger Aussies, is the other pick

Experts have picked out two ASX dividend shares that could provide attractive total returns.

Businesses that pay out an attractive amount of income are appealing to many ASX investors. But growth is important too, and some ASX shares offer the best of both worlds.

Brokers are constantly looking for shares that could be good value. Sometimes they get it wrong, but these two are well-liked and could offer compelling total returns (growth and income).

Telstra Corporation Ltd (ASX: TLS)

The first ASX dividend share we’ll look at is Telstra.

Telstra is the largest telecommunications business in Australia. It provides a wide range of telco services including mobile, NBN, digital health services through Telstra Health, and more.

Telstra is currently rated by a few different brokers, including Morgan Stanley.

Their price target, which is where the broker thinks the Telstra share price will be in 12 months, is $4.60. That implies a possible rise of almost 20%.

In terms of the dividend, the broker is expecting Telstra to pay an annual dividend of 16 cents per share. That equates to a grossed-up dividend yield of 5.8%.

Telstra recently announced that from 1 July, its mobile plan prices would increase in line with CPI inflation. From now on, plan pricing is going to include an annual review “and may increase annually”. That could be helpful for growing the total revenue and net profit after tax (NPAT).

But the company is doing a number of other things to try to increase its profitability, including cutting costs, providing access to its regional network to TPG Telecom Ltd (ASX: TPG) customers, and acquiring Digicel Pacific.

Telstra has said that it plans to grow its dividend over time as its profit and cash flow rise.

Universal Store Holdings Ltd (ASX: UNI)

This ASX dividend share is a specialty retailer of youth casual apparel. The business operates 78 physical stores across Australia.

The product strategy is to offer a “frequently changing and carefully curated selection of on-trend apparel products” to a target market of 16 to 35-year-olds.

One of the company’s main tactics is to open new stores. It has opened 13 stores since its initial public offering (IPO). The company thinks it can reach at least 100 stores across Australia and New Zealand. It has a plan to open another five to eight stores in the next year, predominately in Queensland and NSW.

Online sales are another area of growth. Despite a growing store network, 17.7% of its sales are online, up from 8.8% at the IPO. Universal is continuing to invest in its online capabilities and its digital marketing.

It’s also working on its IT and logistics. A new, purpose-built distribution centre and office are on track for the first half of FY23.

In a recent trading update, Universal said that in the FY22 second half, it had seen total sales growth of 6.9% year on year and online sales growth of 27.3%.

Morgans currently rates this ASX dividend share as a buy with a price target of $5.60. That’s a potential upside of about 25%.

In FY23, Morgans thinks Universal will pay a grossed-up dividend yield of 8.9%.

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 positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended 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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