Leading analysts are always on the lookout for businesses that are undervalued. Some of those stocks have large dividend yields, making them appealing ASX dividend shares.
While there's no guarantee share prices will go up, the idea of both share price growth and sizeable passive income could be a strong combination.
The two businesses I'll cover today are both buy-rated by experts, but they have been through significant volatility in recent times. They are currently trading with fairly low price/earnings (P/E) ratios.
Magellan Financial Group Ltd (ASX: MFG)
Broker UBS describes Magellan as a fund manager which provides institutional, wholesale and retail funds across global, Australian and infrastructure share strategies. It also owns stakes of local investment bank Barrenjoey and financial technology business Finclear.
The broker points out that a significant portion of Magellan's market capitalisation is underpinned by cash and investment.
A key reason for the heavy decline of the Magellan share price over the last few years has been its disappointing investment performance. However, according to UBS, the fund performance has stabilised across key global and infrastructure strategies.
The broker also pointed out that the company has bought back around 4% of issued Magellan shares since February 2025 and remains "well placed to pursue broader capital management plans."
However, UBS did note that outflow risks in infrastructure remaining elevated going into the first half of FY26 after the key portfolio manager's exit, which refers to Gerald Stack.
The June 2025 update saw the ASX dividend share report $0.2 billion of net outflows, though total assets under management (AUM) increased $0.3 billion of AUM to $39.6 billion thanks to investment gains in its funds.
At the current Magellan share price, it could pay a partially franked dividend yield of 5.3% and perhaps close to 7% with franking credits.
Metcash Ltd (ASX: MTS)
UBS describes Metcash as one of the leading wholesale distribution companies in Australia, operating three divisions.
First, its food division is the largest supplier to independent food retailers in Australia across the IGA and Foodland banners, as well as others. Plus, it has a growing foodservice and convenience business that serves business clients like restaurants, cafes and hotels.
Second, its liquor wholesale segment supplies independent liquor stores across clients like Bottle-O and Cellarbrations, as well as on-premise customers in Australia and New Zealand.
Third, the hardware division is the number two player in the Australian hardware market. It owns businesses like Home Hardware, Mitre 10 and Total Tools.
After seeing the recent FY25 result, UBS decided to hike its price target to $4.25, noting the profit achieved in the report was at the upper end of its guidance range and cash realisation was "strong".
The broker thinks lower interest rates should support trade activity and ease cost of living pressures, with operating leverage for the retail and wholesale segments a driver of forecast operating profit (EBIT) margin expansion.
In the food and liquor divisions, UBS sees a resilient core with contract wins a growth driver.
UBS is predicting the annual dividend per share could grow each financial year between FY26 to FY30. In the 2026 financial year, Metcash is projected by the broker to pay an annual dividend per share of 19 cents. That translates into a grossed-up dividend yield of 6.7%, including franking credits.
