There are some compelling S&P/ASX 200 Index (ASX: XJO) dividend shares that have been sold down over the last year or two. With an expected recovery of earnings and dividends in the coming years, they could be leading opportunities to consider today.
One of the most useful things about a share price decline is that it boosts a share's future dividend yield.
For example, if a business with a 6% dividend yield suffers a 10% drop, the dividend yield becomes 6.6%. Plus, buying at a lower price is more attractive and more likely to produce positive capital returns.
With that in mind, there are two ASX 200 dividend shares that could be turnaround ideas.
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Inghams Group Ltd (ASX: ING)
Many readers may know of Inghams as one of Australia's largest poultry businesses. To put into context how much chicken we're talking about, the comany's FY23 first half revealed that its group core poultry volume was 235.7 kilotons (kt).
The business recently reported its FY23 half-year result. It showed that underlying net profit after tax (NPAT) was down 13.1% year over year to $26.6 million, but it was an increase of 885.2% half-on-half.
Inghams has been dealing with various operational challenges, including supply chain disruptions and broad inflationary pressures. But, it's now starting to recover and says that strong long-term demand remains with "key long-term trends intact".
It's seeing "healthy growth in poultry demand" as customers return to pre-COVID patterns. It's also benefiting from a favourable pricing environment, so Inghams is benefiting from a higher average selling price. The poultry business said that it will "pass on further price increases as required".
Ingham's half-year dividend was 4.5 cents per share.
With the ongoing recovery, the business is expected to achieve earnings per share (EPS) growth and dividend growth to FY25.
Using the current Commsec estimates, the Inghams share price is valued at under 12x FY25's estimated earnings, with a possible FY25 grossed-up dividend yield of 8.2%.
As one of the biggest operators in the country, I think it has a number of scale benefits which other competitors may find hard to compete with.
Pinnacle Investment Management Group Ltd (ASX: PNI)
Pinnacle is a business that invests in fund managers in Australia, and has recently expanded to internationally-based fund managers too.
The ASX 200 dividend share provides seed funding, global institutional and retail distribution, and industrial grade middle office and infrastructure. Taking care of back office tasks allows fund managers to focus on delivering investment returns to clients.
The Pinnacle share price is down around 30% from 18 January 2023 and almost 60% lower from November 2021.
It makes sense the fund manager is suffering during a period of market volatility and declines, because these conditions are hurting the funds under management (FUM). In turn, the lower FUM hurts the revenue and NPAT.
However, I don't think the share market is going to be declining forever, nor do I think the investment environment will be uncertain forever. I believe there will be better times ahead for fund managers.
The ASX 200 dividend share's profit is expected to rise in FY24 and FY25.
According to Commsec, the Pinnacle share price is valued at 18x FY24's estimated earnings and 16x FY25's estimated earnings. The FY25 grossed-up dividend yield could be 7.6%.
