3 cheap ASX dividend shares (down more than 35%) to buy in February 2023

Cheap ASX dividend shares could be the place to look for good returns.

| More on:
A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Nick Scali offers a possible 10% dividend yield this year, with plans to grow its store network
  • Pinnacle has suffered amid share market pain, but it could rebound when confidence returns
  • Beacon sees significant expansion potential with more stores and international growth

When share prices go down, I get excited by the opportunity to buy cheap ASX dividend shares at attractive prices.

Inflation and interest rates may have punished many valuations last year, but some have come soaring back. Look at the WiseTech Global Ltd (ASX: WTC) share price and the Lovisa Holdings Ltd (ASX: LOV) share price, both up more than 20% over the past 12 months.

Yet, other names are still trading at steep discounts to where they were a year to 18 months ago.

While the short term may seem uncertain, I think the long term is still positive for the below ASX dividend shares. With their significantly lower share prices, I think these names look like opportunities, with the share prices reflecting the possible short-term pain.

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the leading retailers of furniture in Australia. Not only does the company have the Nick Scali business, but it also owns the Plush brand as well.

Since mid-November, the Nick Scali share price has dropped by more than 35%, which has significantly improved the dividend yield on offer.

Ongoing demand for furniture meant that the FY23 first-half net profit increased by 70%, while the interim dividend per share increased 14.3% to 40 cents.

Commsec numbers currently suggest the ASX dividend share could pay a grossed-up dividend yield of 10.2% in FY23.

With the company's longer-term plans to roll out more stores (particularly Plush stores), grow its online sales (which are very profitable), and expand its ranges, I think Nick Scali has a promising future once we're through this difficult economic period.

Pinnacle Investment Management Group Ltd (ASX: PNI)

Pinnacle is a business involved in funds management. It doesn't manage money itself, rather the ASX dividend share operates by taking sizeable minority stakes in young (or new) funds management businesses and helping them grow.

The company can take care of a number of operational tasks for the fund managers such as legal, distribution services, seed funds under management (FUM), compliance, and so on. It enables the fund manager to focus on the investing side of things.

The Pinnacle share price has fallen more than 45% since November 2021. Investment markets have cooled significantly since then. However, I think this is only going to be a shorter-term headwind. I believe that investors will begin allocating new money to fund managers again in FY24 when interest rates have stopped rising.

Commsec estimates suggest that Pinnacle could pay a grossed-up dividend yield of 4.6% in FY23.

Beacon Lighting Group Ltd (ASX: BLX)

Beacon is a leading retailer of lights and fans. It's another company to have suffered significant pain from the start of 2022.

Since mid-January 2022, the ASX dividend share has dropped by more than 35%. I think it's understandable that there has been some pain because of the possibility of fewer homes being built, fewer renovations, and so on during this period.

However, I don't think the business is worth 35% less than before, particularly with its long-term growth plans of servicing more trade customers, growing its Australian store count from around 120 to more than 180, selling more stuff online, and growing internationally (including in the US).

In FY23, the ASX dividend share could pay a grossed-up dividend yield of 6.7%.

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 positions in and has recommended Lovisa, Pinnacle Investment Management Group, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group and WiseTech Global. The Motley Fool Australia has recommended Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

A couple working on a laptop laugh as they discuss their ASX share portfolio.
Dividend Investing

Buy these ASX dividend stocks for 4% to 7% yields

Analysts are tipping these stocks as buys for income investors this month.

Read more »

A woman relaxes on a yellow couch with a book and cuppa, and looks pensively away as she contemplates the joy of earning passive income.
Dividend Investing

4 top ASX dividend shares to buy right now

Brokers are tipping these income options as buys. But why?

Read more »

A doctor or medical expert in COVID protection adjusts her glasses, indicating growth or strong share price movement in ASX medical, biotech and health companies
Healthcare Shares

Should I buy CSL shares now for their 'steadily growing' dividends?

CSL has increased its interim and final dividend payouts for four years running now.

Read more »

Hand of a woman carrying a bag of money, representing the concept of saving money or earning dividends.
Dividend Investing

3 excellent ASX 300 income stocks for investors to buy

Analysts think these stocks could be in the buy zone right now.

Read more »

Happy man holding Australian dollar notes, representing dividends.
Dividend Investing

3 of the best ASX dividend stocks to buy now

Analysts have given the thumbs up to these stocks. Let's find out why.

Read more »

Man looking amazed holding $50 Australian notes, representing ASX dividends.
Dividend Investing

2 ASX dividend shares to buy next week

Brokers have good things to say about these income options.

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Dividend Investing

Top brokers name 3 ASX dividend stocks to buy

These dividend shares were give the thumbs up by analysts last week. But why?

Read more »

Man smiling at a laptop because of a rising share price.
Dividend Investing

One ASX dividend machine I'd buy over Fortescue shares right now

When it comes to dividends, growth can be better than a high yield.

Read more »