If we invest in the right places, we can unlock a high level of future income. Hence, I'm a fan of buying cheap ASX dividend shares with solid yields.
When a business' share price trades at a lower level than its underlying net asset value (NAV), it can mean the dividend yield is appealing because the market may be undervaluing the cash flow the businesses are distributing to shareholders.
In a world where interest rates are still very high, I'd want to see the stocks I'm investing in for passive future income have a good dividend yield. With that in mind, below are two that tick my investment boxes.
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Centuria Industrial REIT (ASX: CIP)
This is a real estate investment trust (REIT) that's invested in an exciting area of the commercial property market: industrial property.
According to Centuria, businesses are reportedly expanding their supply chains and capabilities in Australia following the disruptions since the onset of COVID-19. That requires large warehouses, which the REIT provides.
The ASX dividend share is seeing enormous organic revenue growth. In the three months to 31 March 2024, the business reported positive re-leasing spreads of 50% in the year to date. In other words, for its newly signed contracts, the business is receiving 50% more rent for the same properties than it was before on the previous contract.
That level of rental growth isn't guaranteed to continue forever, but it shows the high demand for this type of property in Australia's cities.
At 31 December 2023, the business had a NAV per unit of $3.89, which means the current share price is at a discount of around 20% to the NTA. I think that makes it a cheap ASX dividend share.
It expects to pay a distribution of 16 cents per unit in FY24, which would be a distribution yield of approximately 5%.
Bailador Technology Investments Ltd (ASX: BTI)
Bailador is a technology company that aims to invest in some of the most promising private software and technology businesses.
The technology investment business usually invests in businesses that are run by the founders, have a proven business model with attractive unit economics, and generate international revenue as well as repeat revenue.
Bailador aims to pay a dividend yield equivalent to 4% of its pre-tax NTA. This translates to a targeted yield of 5.7%, grossed-up for franking credits.
The business is at a 34% discount to its pre-tax NTA, it looks like a very cheap ASX dividend share to me. That means the actual cash yield, based on the April 2024 pre-tax NTA, could be 6% with a grossed-up dividend yield of 8.6% due to that large NTA discount.
Bailador recently expanded its portfolio and announced a $20 million investment in Venture Startups International, which operates Updoc, a digital healthcare platform that connects consumers who need medical services with registered health practitioners via a telehealth offering. It offers advice, online prescriptions, specialist referrals, pathology referrals and medical letters.
Since its inception, Updoc has served over 200,000 consumers, so it has a sizeable scale. Updoc will use the $20 million to accelerate the development of its products and support continued expansion.
