ASX dividend shares can be great options for income-seeking investors. Term deposits still offer a good level of income, but some stocks can provide a really high dividend yield.
There seems to be a growing expectation that the Reserve Bank of Australia (RBA) will reduce interest rates in Australia next year. If and when that happens, savings in the bank may become less attractive, making high-yield dividend plays more appealing.
Investors have already sent higher share prices of some interest rate-sensitive ASX dividend shares, such as JB Hi-Fi Ltd (ASX: JBH) and Wesfarmers Ltd (ASX: WES), in anticipation of rate cuts.
There aren't many stocks on the ASX still offering a big yield – the ones that do are typically higher-risk. But, having said that, if I were trying to find stocks with big dividend yields, the below two would be at the top of my buy list, partly due to their low prices.
APA Group (ASX: APA)
APA is one of the largest energy businesses in Australia, with a market capitalisation of $9 billion, according to the ASX.
The business owns a portfolio of energy assets, including a large national gas pipeline, gas processing facilities, gas energy generation, solar farms, wind farms, and electricity transmission assets. Impressively, it transports half of the nation's gas usage.
The APA share price is down 18% in the last 12 months and 40% from August 2022, which means it's currently a lot cheaper. APA's energy assets are still doing the same job they were two years ago and making cash flow. Energy is just as important as it was two years ago.
APA regularly invests in its portfolio to boost its asset base and grow cash flow. The fact that most of its revenue is linked to inflation also helps.
The ASX dividend share recently noted the Australian Energy Regulator (AER)'s final decision that the South West Queensland Pipeline (SWQP) will not be subject to full price regulation and that the existing light regulation regime will remain in place. This helps remove some uncertainty that was hanging over the business and gives APA confidence to invest in more infrastructure.
APA has grown its distribution every year for the last two decades. The guided payout for FY25 is 57 cents, which translates into a distribution yield of 8%.
Centuria Office REIT (ASX: COF)
As the name suggests, this is a real estate investment trust (REIT) that owns office buildings. The Centuria Office REIT share price has dropped 18% in the last year and 57% since September 2021. It now seems very cheap to me.
Office buildings are not exactly a high-growth sector, but I think there are signs to be positive. For starters, more businesses are mandating partial or total returns to the office, such as Coles Group Ltd (ASX: COL) recently telling 5,000 office workers they will need to go to the workplace at least three days a week.
The ASX dividend share continues to sign new lease terms, which is maintaining its occupancy rate above 90%. There is a limited supply of new office buildings being built, partly due to high development costs, which helps support demand for existing office buildings.
I also like the initiative of the business to work with ResetData, a liquid immersion cooling (LIC) data centre operator which is building a 1.5MW edge data centre. This helps utilise office building space, improve rental returns and increase the underlying value of that building. If it can agree on more data centre deals, this could be a catalyst for the share price to rise.
The business has guided that it's going to pay a distribution per security of 10.1 cents in FY25, which translates into a distribution yield of 9%.
