One of the great things about the share market is being able to find ASX dividend stocks that pay large dividend yields. Some offer yields that are better than term deposits and also offer the potential of capital growth.
Not every business pays a dividend yield of at least 7%. It takes a combination of good cash flow and profit for the business, a generous dividend payout ratio and a good valuation.
There are some companies with a long track record of consecutive annual dividend growth, such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), but it doesn't have a very large yield.
The two ASX dividend stocks below have very impressive payouts.
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Nick Scali Limited (ASX: NCK)
Nick Scali is a furniture retailer that sells through both the Nick Scali brand and the Plush brand after acquiring it during the COVID-19 period.
The business has grown its dividend every year since 2013, which is an impressive record for almost any ASX business, let alone a furniture retailer.
I'm certainly not expecting the dividend per share to rise in FY24 amid the cost of living troubles many households are experiencing. But, I think FY24 could still see a solid payout, with potentially larger shareholder returns in the long term.
Nick Scali can grow operationally by expanding its store networks in Australia and New Zealand, selling a higher proportion of its volume online, and expanding its product ranges.
In FY24, the business could pay a grossed-up dividend yield of 7.25% according to the projection on Commsec and 7.7% in FY25.
The Nick Scali share price is down 14% since mid-August, so it's cheaper than it was earlier this year.
Charter Hall Long WALE REIT (ASX: CLW)
This is a real estate investment trust (REIT) which is invested in a variety of properties across Australia in different sectors and with different tenants. Many of the properties have long-term rental agreements, which gives the ASX dividend stock good income security and visibility.
Indeed, at the last update for the three months ending 30 September 2023, we heard the business had a weighted average lease expiry (WALE) of 11 years, which is a long time in the REIT world.
Interest rates are certainly hurting, but it's seeing good rental growth. Roughly half of the rental increases are linked to CPI inflation, and the known CPI reviews for the year will average 5.5% after the release of the September CPI announcement. Combined with the 3.1% fixed rental increase across the rest of the portfolio, the FY24 weighted average rent review is expected to be 4.3%. That's a solid rental increase for just one year.
It's expecting to generate operating earnings per security (EPS) of 26 cents per unit in FY24 and pay a distribution of 26 cents. That means the ASX dividend stock could pay a distribution yield of 7.4% in the current financial year.
