The great thing about falling share prices is that it boosts the dividend yield on offer from ASX income stocks.
Choosing the right businesses could lead to a resilient cash flow for investors during uncertain times.
Dividends and distributions are not guaranteed, but some look more stable to me than others.
With that in mind, I like the look of these two income stocks.
Rural Funds Group (ASX: RFF)
Rural Funds is one of the most interesting real estate investment trusts (REITs) in my opinion.
It owns a portfolio of farms across Australia. Diversification is important, so it's good to know that the farms are diversified across climactic conditions and by farm type. It owns almond farms, macadamias, cattle, vineyards and cropping (sugar and cotton).
The Rural Funds share price has dropped around 30% since early June 2022, which has pushed up the prospective distribution yield.
Rural Funds expects to pay a total distribution of 12.2 cents per unit in FY23. That translates into a forward yield of 5.7%.
The ASX income stock has a goal to increase its distribution by 4% per year for investors. This growth is funded by a combination of organic rental increases at the farms and productivity improvement investments at the farms.
It's currently trading at a 23% discount to the adjusted net asset value (NAV) of $2.78 at 31 December 2022, which gives investors a good margin of safety.
Nick Scali Limited (ASX: NCK)
Nick Scali has been hit very hard since it reported its half-year earnings in early February this year, down 26%. Shares in the furniture retailer have also fallen more than 40% since November 2021.
The ASX income stock reported a 70% increase of earnings per share (EPS) to 74.8 cents, while the interim dividend per share increased 14.3% to 40 cents per share.
But, for January 2023, Nick Scali said that its Nick Scali brand written sales orders were 12.1% below January 2022 and 22.9% above pre-COVID-19 January 2020.
The company expects to open four new Nick Scali stores in the second half of FY23, in addition to the two that opened in the first half of FY23.
I think the business has a number of positive tailwinds including a store rollout, range expansion and growth of profitable online sales.
It's not a surprise to think that sales and profit are going to be lower in the 2023 calendar year compared to 2022. But, I don't think pessimism will be widespread forever, so I think this time of fear is a good time to consider investing.
Commsec numbers suggest Nick Scali could pay a total dividend of 59 cents per share in FY24, translating into a grossed-up dividend yield of 9.2% despite expectations of a large cut.
