2025 could be the year that ASX dividend shares become more attractive investments again. If the RBA's predicted interest rate cuts occur this year, investors may want to switch from bank savings accounts to passive income stocks.
If rate cuts do occur, which sectors could benefit more than the average ASX share? I have some ideas about two ASX dividend shares that I believe could have very good years.
Of course, it's possible that rate cuts may not happen. However, I believe the valuation and growth prospects of both companies are good enough to justify a long-term investment even if RBA rates are held at today's level for the whole year.
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Nick Scali Limited (ASX: NCK)
Nick Scali is a large furniture retailer in Australia. It operates both the Nick Scali and Plush businesses and recently bought Fabb Furniture in the United Kingdom.
The ASX dividend share has an impressive dividend record. It grew its payout every year between 2013 to 2023. There was a dividend reduction in the 2024 financial year, but the FY24 payment was larger than the FY21 annual dividend.
If the company repeated the size of its FY24 payout in FY25, the current grossed-up dividend yield would be 6.5%, including franking credits.
While a rate cut could increase people's willingness to buy new furniture, I'm focused on the company's several strategies for boosting profit.
The company can grow the number of Nick Scali and Plush stores in its domestic market, increasing its scale. It can offer more products, sell more items online and be more efficient across the business.
One of the things I'm most excited about is its presence in the UK, which is a much larger market due to its bigger population. Nick Scali could grow its store count in the UK significantly.
GQG Partners Inc (ASX: GQG)
GQG is a fund manager based in the United States that is expanding globally to places like the UK, Canada, and Australia. It offers strategies such as US shares, global shares, international shares, emerging market shares, and dividend shares.
The business has done an exceptional job of growing funds under management (FUM) to where it is today, thanks to its funds' investment performance and its ability to attract new FUM.
I like the way the fund manager invests, so it's not surprising that the business added approximately US$116 billion of FUM between December 2019 and November 2024.
The ASX dividend share has committed to a dividend payout ratio of 90% of distributable earnings, allowing the business to give investors a large dividend yield while still keeping some profit to enhance the balance sheet or invest in the business.
The Commsec projection suggests the GQG FY25 dividend yield could be 10.5%, which is a huge yield.
