The Australian share market typically provides investors with a 4% dividend yield.
And while that it undoubtedly attractive, you don't have to settle for that.
That's because there are ASX shares out there that have been tipped to provide investors with above-average yields.
For example, listed below are two ASX shares that are forecast to provide dividend yields of 5% and 6.5% this year. Here's what you need to know about them:
HomeCo Daily Needs REIT (ASX: HDN)
Analysts at Morgans think that HomeCo Daily Needs would be a great ASX share to buy for dividends.
It is an Australian REIT with a mandate to invest in convenience-based assets across the target sub-sectors of neighbourhood retail, large format retail and health and services.
Morgans currently has an add rating and a $1.37 price target on its shares. It believes the company's high-quality tenants and development pipeline mean it is well-placed for the future. The broker said:
HDN's $4.7bn portfolio is focused on daily needs assets (Large Format Retail; Neighbourhood; and Health & Services) across +50 properties with the top 3 tenants Bunnings, Coles and Woolworths. 70% of leases are fixed; 21% linked to CPI; and 9% based on supermarket turnover. The portfolio has resilient cashflows and continues to be a beneficiary of accelerating click & collect trends. +80% of tenants are national and ~75% of tenants offer click & collect reinforcing the importance of assets being able to support 'last mile logistics'. Sites are also in strategic locations with strong population growth (+80% metro). HDN offers an attractive distribution yield and the development pipeline provides growth opportunities.
The broker expects HomeCo Daily Needs to pay dividends per share of 8 cents in FY 2024 and then 9 cents in FY 2025. Based on the current HomeCo Daily Needs share price of $1.23, this will mean yields of 6.5% and 7.3%, respectively.
Telstra Group Ltd (ASX: TLS)
Another ASX share that could offer above-average dividend yields is Telstra. It is of course Australia's largest telecommunications company.
Goldman Sachs is positive on the company and sees a lot of value in its shares at current levels. It has a buy rating and $4.25 price target on them. The broker also sees opportunities for Telstra to unlock further value down the line. It explains:
Telstra is the incumbent telecom operator in Australia. We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive. We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn. Although there is some debate around the strategic benefits, we see a strong rationale for monetizing the recurring NBN payment stream, given its inflation-linked, long duration cash flows could be worth $14.5bn to $17.9bn, with no loss of strategic benefit.
In respect to dividends, Goldman is forecasting fully franked dividends of 18 cents per share in FY 2024 and then 18.5 cents per share in FY 2025. Based on the current Telstra share price of $3.51, this will mean yields of 5.1% and 5.3%, respectively.
