The high-yield ASX dividend share space can be a risky area of the market, depending on the reason the business has a high dividend yield. I've got my eyes on a few businesses currently.
Is the dividend yield big because it's unsustainably high and it's going to be cut soon? Or is the market undervaluing a company's underlying worth and its ability to produce cash flow?
The two businesses I'm going to discuss both have large dividend yields, and I think they are capable of producing solid capital growth over the next couple of years.
Bailador Technology Investments Ltd (ASX: BTI)
This company invests in relatively small technology businesses. The companies that Bailador typically invests in are run by founders, have a proven business model with attractive unit economics, international revenue generation, huge market opportunity, and the ability to generate repeat revenue. That's a powerful combination.
It has built a portfolio across a number of areas, including hotel management and distribution software, financial advice and investment management software, digital healthcare, tours and activities booking software, volunteer management software, and more.
The high-yield ASX dividend share aims to provide investors with a 4% dividend yield based on its pre-tax net tangible assets (NTA). However, due to the fact that it's trading at a 36% discount to its pre-tax NTA at May 2025, it may have a fully franked dividend yield of 6.3%, or 9% grossed-up, if the NTA doesn't change.
The revenue of Bailador's investment companies is growing at a strong pace, which I believe is helping boost the underlying value of those businesses. As the value of those companies grows, it helps boost Bailador's overall NTA. The underlying values of the businesses could also be boosted by lower interest rates in the current falling interest rate environment.
GQG Partners Inc (ASX: GQG)
GQG is a fund manager based in the US, though it has clients across the world, in places like Europe, Canada, and Australia.
There are two factors that help create a large dividend yield with this business. First, it has a relatively generous dividend payout ratio. Second, it typically trades on a low price-earnings (P/E) ratio. Most fund managers do trade on a low P/E ratio, but I don't think GQG's valuation accounts for its growing earnings profile.
The size of its funds under management (FUM) is the key factor for its revenue generation (which then flows on to the profit and dividend).
At 31 December 2024, it had FUM of US$153 billion, which had since grown to US$163.6 billion by 30 April 2025, thanks to a combination of US$6 billion in net inflows and investment performance.
I think the high-yield ASX dividend share's payout and share price can rise in the coming years as the market sees the business progress and drives earnings higher.
A forecast from Macquarie suggests GQG could pay a dividend yield of 10.7% in 2025.
