ASX dividend shares that pay large dividend yields may be able to deliver strong returns just from the passive income.
I wouldn't suggest that investors buy something just for the yield. It's more important for the valuation to make sense. There's not much point in getting a 10% income return if the share price falls by 20%.
With that in mind, let's look at two ASX dividend shares where the yield could be huge in FY24.
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Centuria Office REIT (ASX: COF)
This is a real estate investment trust (REIT), the largest pure-play office REIT in Australia. It's described as having a portfolio of high-quality office assets that are situated in core submarkets throughout Australia.
The Centuria Office REIT share price has fallen 55% since September 2021. Will the underlying value of the offices fall that far? Time will tell.
In FY23 it had portfolio occupancy of around 97.1%, with 78% of rental income coming from government, multinational corporations and listed entities.
The business is expecting to generate funds from operations (FFO) of 13.8 cents per unit and pay a distribution per unit of 12 cents in FY24. That means the ASX dividend share is trading at just 8 times FY24's forecast rental profit, with a guided distribution yield of 10.4%.
Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop has a national network of over 120 stores across Australia and New Zealand that sell hair removal products. The company's position in the market enables it to negotiate exclusive products with suppliers.
It has expanded beyond its core range to oral care, hair care, massage, air treatment and beauty categories.
The trading environment is uncertain, so the company is focused on staying disciplined with its gross profit margin management and maximising gross profit dollars. Total sales were down 5.1% year over year in the period of 1 July 2023 to 19 August 2023.
Shaver Shop has grown its dividend each year since 2017, though the growth streak isn't guaranteed to continue in FY24 because of the tricky economic conditions.
Even so, the current estimate on Commsec suggests that Shaver Shop could pay a grossed-up dividend yield of 13.4%.
The business can grow profit in the future by expanding its store network, selling new products, growing its online presence and strategically increasing prices when it can.
