2 high-yield ASX stocks I'd buy for dividends

I think these stocks are undervalued and offer a compelling yield.

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Investors searching for passive income could do very well with ASX dividend stocks that offer big dividend yields.

When a business is trading at a cheap level compared to its earnings, or at a large discount to the underlying net asset value (NAV), it can push up the potential yield.

I believe the market is underestimating how much cash flow the below two businesses can generate and pay to shareholders. That's why I'm calling them buys.

Centuria Office REIT (ASX: COF)

As the name suggests, this is a real estate investment trust (REIT) that owns office properties in Australia.

There is a lot of negative commentary about office buildings at the moment because of the COVID-19 effects of more people working from home, which seems to be a permanent shift.

According to Centuria, the worst areas of demand impact are the Melbourne and Sydney CBDs. However, areas seeing strong 'net absorption' of demand include the Melbourne fringe, Canberra, the Brisbane fringe, the Brisbane CBD, and Adelaide.

Centuria Office REIT says 92% of its portfolio is located outside of the Sydney and Melbourne CBD, so it's actually a lot better positioned than the market seems to give it credit for.

At 31 March 2024, the ASX dividend stock's portfolio occupancy was 94.3% and it had a "healthy" 4.4 year weighted average lease expiry (WALE). These are quite strong numbers in my opinion.

The business is expecting to pay a distribution per unit of 12 cents for FY24, which translates into a distribution yield of around 9.75%. I think that's a high yield for a REIT and, to me, suggests it may be trading cheaply for how much rental profit it's making.  

The Centuria Office REIT share price is down around 50% since September 2021, as seen on the chart below.

Accent Group Ltd (ASX: AX1)

Accent is a major shoe retailer in Australia. It is a local distributor for several global brands, including CAT, Dr Martens, Henleys, Herschel, Hoka, Kappa, Merrell, Skechers, Ugg, and Vans.

Pleasingly, the consumer stock is also growing its own portfolio of brands so it's not as reliant on those international names. Some of its own brands include Glue Store, Platypus, Stylerunner and The Athlete's Foot.

As the chart below shows, the Accent Group share price has dropped around 30% since April 2023, dramatically increasing the prospective dividend yield.

According to the estimates on CMC Markets, the ASX dividend stock is expected to pay an annual dividend per share of 11.5 cents in FY24 and 14.3 cents in FY26. This translates into forward grossed-up dividend yields of around 9% in FY24 and 11% in FY26.

It's understandable why the Accent share price has fallen – the retail environment is uncertain amid high inflation and elevated interest rates. But, I believe the decline has gone too far.

I'm optimistic about Accent's future because of an ongoing store rollout, long-term growth of digital sales, a growing portfolio of owned brands, and the potential for a recovery in household retail spending in the next couple of years.

Motley Fool contributor Tristan Harrison has positions in Accent Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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