Goldman Sachs says these 3 ASX dividend shares are buys

What is the broker saying about these income options?

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There are a lot of options for income investors on the Australian share market. So many it can be hard to decide which ASX dividend shares to buy.

To narrow things down, let's take a look at a few that Goldman Sachs is tipping as buys this month. They are as follows:

Challenger Ltd (ASX: CGF)

The broker thinks that this annuities company could be an ASX dividend share to buy right now.

It likes Challenger due to its exposure to the superannuation market and the favourable sales environment for annuities. It explains:

CGF is Australia's largest retail and institutional annuity provider across Term and Lifetime annuities with a funds management business. We are Buy rated on the stock. We like CGF because: 1) it has exposure to the growing superannuation market across Life and Funds Management; 2) higher yields should drive a favorable sales environment for retail annuities as well as an improvement in margins; 3) its annuity book growth looks well supported through a diversified distribution strategy.

In respect to dividends, the broker is forecasting fully franked dividends of 26 cents per share in FY 2024 and then 27 cents per share in FY 2025. Based on the current Challenger share price of $6.68, this will mean dividend yields of 3.9% and 4%, respectively.

The broker currently has a buy rating and $7.50 price target on its shares.

QBE Insurance Group Ltd (ASX: QBE)

Goldman Sachs also thinks that this insurance giant could be a top ASX dividend share for income investors to buy.

It likes the company due to its exposure to commercial rates. It explains:

We are Buy-rated on QBE because 1) QBE has the strongest exposure to the commercial rate cycle. 2) QBE's achieved rate increases continue to be strong & ahead of loss cost inflation. 3) North America on a pathway to improved profitability. 4) Valuation not demanding. 5) Strong ROE.

The broker is forecasting dividends per share of 62 US cents (94 Australian cents) in FY 2024 and 63 US cents (95.5 Australian cents) in FY 2025. Based on the current QBE share price of $18.36, this equates to dividend yields of 5.1% and 5.2%, respectively.

Goldman has a buy rating and $20.90 price target on its shares.

Super Retail Group Ltd (ASX: SUL)

A third ASX dividend share that Goldman Sachs is bullish on right now is Super Retail. It is the owner of popular store brands BCF, Supercheap Auto, Macpac, and Rebel.

The broker believes the company is well-positioned to navigate the tough operating environment thanks to its vast loyalty program. It said:

We believe SUL will display resilience in a softer economic environment that is built upon its competitive advantage of high loyalty (~11.0m active members accounting for >75% of sales) and this will be further bolstered as the company launches the Rebel loyalty program and continues to build personalisation capabilities. Hence, we are Buy-rated on SUL.

Goldman expects Super Retail to pay fully franked dividends per share of 67 cents in FY 2024 and then 73 cents in FY 2025. Based on its current share price of $13.21, this will mean yields of 5.1% and 5.5%, respectively.

The broker has a buy rating and a $17.80 price target on its shares.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended Challenger. 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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