Brokers are always on the lookout for opportunities that could deliver good returns for investors. It's useful when an ASX dividend share is also paying good dividends because it can boost overall returns.
Some businesses can pay a sizeable dividend and still produce long-term earnings growth, helping unlock capital growth for investors.
UBS has named a few ASX dividend shares as buys because of their valuation and outlook. Let's take a look at which stocks the expert likes.
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Coles Group Ltd (ASX: COL)
UBS describes Coles as a business with two divisions. With food, it's the number two food retailer in Australia. It also has a number of liquor retailing businesses, including Liquorland, First Choice Liquor, and Vintage Cellars.
The business benefited from the tailwind of food inflation helping its revenue and net profit over the last couple of years.
It has managed to continue delivering growth, despite the lowering of the rate of inflation.
In the 12 weeks to 30 March 2025, Coles reported that its total group sales grew by 3.7% to $9.4 billion. The rising revenue is helping the profit and dividend, which the board could continue to hike. Since starting in 2019, it has increased its annual payout each year. The business has also invested heavily in automated warehouses, which can help with efficiencies, stock flow, and margins.
UBS is predicting the ASX dividend share's annual dividend payout could grow to 72 cents per share in FY25 and 82 cents per share in FY26. That means, at the current Coles share price, it's trading with a projected grossed-up dividend yield of approximately 5.4% for FY26, including franking credits.
UBS rates the business as a buy, with a price target of $23.50. That implies a possible rise of 8% from its current position.
Collins Foods Ltd (ASX: CKF)
UBS describes this ASX share as the largest KFC franchisee in Australia, with well over 200 locations, mainly located in Queensland and Western Australia. The business is also growing KFC networks in Germany and the Netherlands.
Collins Foods recently decided to exit the Taco Bell business, which UBS thought was a sensible redistribution of capital, considering the challenges Taco Bell had faced up until then.
UBS notes that the ASX dividend share is trying to drive same-store sales growth in Australia and also manage costs. In Germany, the business has signed a binding agreement with Yum! Brands to accelerate its growth in the country, targeting (but not limited to) 40 to 70 new KFC restaurant openings across the country over the next five years. Collins Foods has identified potential acquisition opportunities, as well as opportunities for further expansion in Europe.
The broker currently rates this ASX share as a buy, with a price target of $9.80. UBS is forecasting that Collins Foods could pay a grossed-up dividend yield of 5.4% in FY26, including franking credits.
