Dividend income investors are probably on the lookout for businesses that could offer a good dividend yield, reliable payments, and payout growth.
Dividends aren't guaranteed, of course. That's why they don't have the same risk profile as term deposits.
However, I'd much prefer ASX dividend shares over term deposits because they can provide a stronger yield and growth. Term deposits don't really provide inflation protection, and the interest rate on offer may reduce further.
The RBA has already cut the Australian cash rate twice this year, and there are expectations that there could be more cuts over the next 12 months, including another cut in July.
With that outlook for rate cuts in mind, I'm drawn to the below two ASX dividend shares, which is why they're both in my portfolio as a dividend income investor.
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Centuria Capital Group (ASX: CNI)
Centuria is a fund manager focused on real estate and tax-effective investment bonds.
Unsurprisingly, the high-interest rate environment has been painful for commercial property. The high cost of debt has reduced operating profits, been a headwind for property valuations, and seemingly hampered net inflows of clients, giving Centuria additional money to manage.
All of those headwinds are being reduced by the RBA rate cuts and could turn into tailwinds, which is a very promising development if Australia's central bank cuts three or four more times over the next 12 months.
For me, the business is compelling as an ASX dividend share because its operating earnings per share (OEPS) and distribution could grow substantially over the next couple of years amid the expected rate cuts.
In FY25, the business has guided OEPS growth of 2.5% to 12 cents per share, and it could pay a distribution per security of 10.4 cents (up 4% year over year). At the current Centuria share price, that translates into a distribution yield of 6%, which I think is a solid starting point for dividend income investors.
Centuria Industrial REIT (ASX: CIP)
This is one of the real estate investment trusts (REITs) that Centuria manages. It's the largest listed pure-play Australian industrial REIT on the ASX.
It owns a portfolio of high-quality industrial properties around Australia, focused on Australia's largest cities.
The business is benefiting from a number of helpful tailwinds, including e-commerce adoption, data centres, and refrigerated space (for food and medicine). That's translating into stronger rental potential for its properties and could push up the valuations of the warehouses over time, particularly as interest rates reduce.
In my view, its distribution is solid for dividend income investors. In FY25, it expects to grow its payout to 16.3 cents per security, which translates into a distribution yield of 5.1%. I'm expecting further growth in the coming years.
As a bonus, it's currently trading at an 18% discount to its underlying value, the net tangible assets (NTA) per unit (as of 31 December 2024).
