If there's one piece of stock market wisdom that we can all take to the bank, it is that good-quality ASX dividend shares never stay cheap for long.
The legendary investor Benjamin Graham, who once took a young Warren Buffett under his wing, proselytised that the stock market was a voting machine in the short term, but a weighing machine in the long run.
So let's talk about some dirt-cheap ASX dividend shares that I think are too cheap to ignore today. Retail has been one of the sectors hardest hit this year. Rising interest rates seem to have convinced investors that retail shares are in for a shellacking very soon.
There is some merit to this line of thinking of course. When times are tough, consumers typically tighten their belts by cutting back on non-essential spending. And that typically includes retail.
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2 ASX retail shares with massive dividend yields right now
But some of the falls we have seen in good-quality retail names have arguably been extreme. Take Harvey Norman Holdings Limited (ASX: HVN), one of the most dominant retailers in the country.
In 2022 to date, Harvey Norman shares have fallen by a painful 17% or so. Harvey Norman has also shed close to a third of its value since its last all-time high above $6 a share back in early 2021:
But this has left Harvey Norman shares with a trailing and fully-franked dividend yield of 8.98% today. With the value of that full franking, this yield would gross up to a whopping 12.83%.
Now Harvey Norman could well cut its dividend next year if times do get tougher, meaning that investors would not enjoy an 8.98% yield if they bought shares today.
But even if the dividends go back to the 24 cents per share that Harvey Norman paid out during the COVID-ravaged year of 2020 next year, investors would still enjoy a yield of 5.74% on the current Harvey Norman share price. That's 8.2% grossed-up.
JB Hi-Income?
It's a similar story with another top-notch ASX retailer in JB Hi-Fi Limited (ASX: JBH). JB shares are down by almost 13% this year, as you can see below:
But this has left the company with a fully-franked trailing dividend yield of 7.43% right now.
Again, JB is one of the strongest retailers in Australia. In FY 2022, this company reported a 7.7% rise in net profits after tax (NPAT) and a 43% increase in its final dividend.
Now, JB might not manage the total of $3.16 in dividends per share that it has managed in 2022 next year. But even if its dividends fell back to 2020 levels, investors would enjoy a yield of 6.57% on today's current share price.
I think the market has oversold these top-quality companies this year on fears about what might happen next year. But this is exactly the kind of sentiment that creates a compelling buying opportunity.
Do I think both JB Hi-Fi and Harvey Norman will be around in 10 years, bigger and more successful than they are today? Yes.
As such, I see little reason not to take advantage of the steep share price falls we have seen over 2022. I think this is a great chance to lock in a pretty massive fully-franked dividend yield for years to come.
