There are plenty of ways to generate passive income. For example, you could keep cash in a savings account, buy bonds, rent out property, or have a side hustle.
While all are valid options, I don't believe any of them compare to the potential income you can generate from cheap dividend-paying ASX shares.
The good news is that recent market volatility has dragged a number of quality ASX shares to discounted levels, boosting the potential dividend yields on offer with them.
With that in mind, here are two cheap ASX shares that could be great options for passive income seekers.
Rural Funds Group (ASX: RFF)
Bell Potter believes that Rural Funds is a cheap ASX share. In fact, it highlights that the agricultural property company's "share price has continued to remain subdued and trading at its largest discount to market NAV since listing."
While disappointing for shareholders, it may have made Rural Funds a great option for passive income seekers. For example, Bell Potter is forecasting dividends per share of 11.7 cents in FY 2024 and FY 2025. Based on its current share price, this implies yields of 6.2% for investors.
The broker also sees plenty of upside for its shares. It has a buy rating and a $2.40 price target on its shares.
Universal Store Holdings Ltd (ASX: UNI)
Another cheap ASX share for income investors to look at is youth fashion retailer Universal Store. Morgans believes its shares are a bargain, noting that "UNI's attractive array of medium-term growth prospects is undervalued at a single digit FY25 P/E."
As for income, the broker is forecasting fully franked dividends of 26 cents in FY 2024 and then 29 cents in FY 2025. Based on the latest Universal Store share price of $3.39, this equates to yields of 7.7% and 8.6%, respectively.
As with Rural Funds, the broker also sees a significant upside and has an add rating and $4.25 price target on its shares.
