There are a large number of ASX income stocks out there for investors to choose from.
To narrow things down, let's take a look at two quality options that analysts are tipping as buys.
Here's what they are saying about these stocks:
HomeCo Daily Needs REIT (ASX: HDN)
Analysts at Morgans think that HomeCo Daily Needs could be an ASX income stock to buy.
It is a property company with a focus on neighbourhood retail and large format retail assets (retail parks). It notes that its three largest tenants include Coles Group Ltd (ASX: COL), Wesfarmers Ltd (ASX: WES), Woolworths Group Ltd (ASX: WOW).
Morgans believes HomeCo Daily Needs is well-positioned thanks to favourable trends and its development pipeline. It explains:
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 this to lead to the payment of 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 $1.21, this will mean dividend yields of 6.6% and 7.4%, respectively.
Morgans has an add rating and $1.37 price target on its shares.
Transurban Group (ASX: TCL)
Another ASX income stock that analysts are tipping as a buy is Transurban.
It builds and operates toll roads in Melbourne, Sydney and Brisbane, as well as in Greater Washington, United States and Montreal, Canada. In addition, it classes itself as a technology company, researching and developing innovative tolling and transport technology that makes travel easier for everyone.
Bell Potter is a big fan of the company and has named it on its favoured list this month. It likes the company due to its development pipeline, positive inflation exposure, and low risk cashflows. It said:
We believe the current inflationary environment is favourable for Transurban given its inflation-linked revenue stream with annual escalators. Moreover, TCL provides low risk cash flows over the long term, with long concession duration (30+ years), and relative traffic/income resilience. The group's current pipeline of growth projects is $3.3 billion (TCL's share of total project cost) and further huge development opportunities are expected over the next few decades, supported by population and economic growth.
Bell Potter is forecasting dividends per share of 63.6 cents in FY 2024 and then 65.1 cents in FY 2025. Based on the current Transurban share price of $12.81, this will mean dividend yields of 5% and 5.1%, respectively.
The broker has a buy rating and $15.50 price target on its shares.
