Are you on the lookout for some strong picks for your income portfolio? If you are, then it could be worth checking out the two in this article.
They are strong businesses that have been given buy ratings by analysts and tipped to offer big dividend yields. Here's what is being recommended:
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Aurizon Holdings Ltd (ASX: AZJ)
The team at Morgans thinks that Aurizon could be a strong ASX dividend share to buy.
It is Australia's largest rail freight operator delivering more than 250 million tonnes of Australian commodities to the world.
Morgans thinks that the market has been too negative on Aurizon and sees scope for some big dividend yields in the near term. It said:
There is negative narrative around the lack of growth (or even declining earnings) in the Bulk and Containerised Freight segments. We suspect this has contributed to the recent sub debt issue and announcement of a cost-out program.
However, the higher quality Network and Coal segments contribute the bulk of earnings. We make FY25-27F earnings and DPS downgrades (material in FY25F), and allow for no further buybacks but instead assume debt is paid down with free cashflow. Upgrade to ADD. Revised target price $3.10. Trading on a dividend yield of c.8%, double-digit free cashflow yield, and 5-6x EV/EBITDA (all FY26F).
In respect to income, Morgans is forecasting dividends per share of 15 cents in FY 2025 and then 23 cents in FY 2026. Based on its current share price of $3.01, this would mean attractive dividend yields of 5% and 7.6%, respectively.
Morgans currently has an add rating and $3.10 price target on its shares.
Harvey Norman Holdings Ltd (ASX: HVN)
Over at Bell Potter, its analysts think that Harvey Norman could be a strong ASX dividend share to buy for an income portfolio.
As well as being better value than peers, the broker feels that the retail giant's outlook is positive thanks to interest rate cuts. It said:
We view HNV's valuation more compelling, particularly given its additional exposure to furniture and land portfolio relative to JBH and WES. In addition, we see the company as a key beneficiary of RBA rate cuts as housing market returns to a more buoyant phase, aided by rising disposable income and house prices during the rate-cutting cycle and that should buoy consumer sentiment. All up, Harvey Norman is well-positioned to benefit from increased spending on big ticket household items such as furniture and electronics.
As for income, the broker is forecasting fully franked dividends of 25.4 cents per share in FY 2025 and then 28.1 cents per share in FY 2026. Based on its current share price of $5.26, this would mean dividend yields of 4.8% and 5.3%, respectively.
Bell Potter has a buy rating and $6.00 price target on its shares.
