With the latest inflation data making a RBA cash rate cut more likely next month, I think it's a great time to put money to work into some Australian dividend stocks.
The share prices of names like Commonwealth Bank of Australia (ASX: CBA) have soared in recent months. Rapidly rising share prices mean the dividend yields have been pushed down, making these investments less appealing for income seekers.
I believe dividend-focused investors would be better served by looking at potential investments that are trading at good value and offer investors a pleasingly high dividend yield. Let's get into which Australian dividend stocks I view as undervalued opportunities.
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Bailador Technology Investments Ltd (ASX: BTI)
This is an investment company focused on relatively small technology businesses that have a number of positive attributes. This includes having a proven business model with attractive unit economics, international revenue generation, a "huge" market opportunity and the ability to generate recurring revenue.
Companies pay dividends from profits they make, which can include investment gains. When its portfolio of businesses increase in value, it can fund Bailador's dividends and lead to an increase of the company's underlying value (the net tangible assets – NTA).
In the five years to June 2025, its portfolio has returned an average of 11.2% per year, after tax and fees, including dividends paid. The Australian dividend stock is currently invested in areas like hotel software, digital healthcare, and financial advice and investment management software.
It aims to pay a fully franked dividend yield of 4% of the pre-tax NTA. But, it's trading at a 44% discount to the June 2025 NTA at the time of writing. This means it likely offers a grossed-up dividend yield of 8.7%, including franking credits.
Rural Funds Group (ASX: RFF)
Rural Funds is another Australian dividend stock that looks significantly undervalued to me.
It owns a portfolio of farmland across Australia, in areas like cattle, vineyards, almonds and macadamias. I like the spread of its assets across different subsectors for the diversification benefits that provides.
The business has rental growth agreed in most of its leases with high-quality tenants, providing a natural tailwind for rental profits in the longer-term.
Rural Funds has already provided distribution for FY26 of 11.73 cents, which translates into a future distribution yield of 6.5%.
Why does it look like a bargain price? Aside from the tailwind of likely further interest rate cuts, the business is currently trading at a discount of more than 40% to its net asset value (NAV) at 31 December 2024.
Centuria Industrial REIT (ASX: CIP)
The third Australian dividend stock I want to highlight is a real estate investment trust (REIT) that owns large industrial properties around Australia, mostly located in key metropolitan areas.
Distribution centres and logistics are increasingly important these days amid the increase in online shopping, an increased need for refrigerated space (for food and medicine) and so on.
The ongoing demand for warehouses should help the business grow its annual distribution thanks to rental income growth and the cost of debt likely to reduce in the medium-term.
Its FY25 distribution translates into a distribution yield of 5.1%. The business is currently trading at a discount of around 20% to its net tangible assets as of 31 December 2024.
