Insights

2 ASX dividend shares that could be buys with yields above 4%

Rural Funds and Accent Group could be ideas for income.
The post 2 ASX dividend shares that could be buys with yields above 4% appeared first on The Motley Fool Australia. –

There are some ASX dividend shares that might be options for creating income.

Businesses that have yields of more than 4% could have the ability of improving yields from a portfolio.

Here are two possible businesses for income:

Rural Funds Group (ASX: RFF)

Rural Funds is a agricultural real estate investment trust (REIT) that owns a portfolio of farms in different sectors including cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).

It aims to lease its portfolio to experienced agricultural operators like Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE), Olam, JBS and Queensland Cotton.

Rural Funds has a long-term relationship with tenants, with a weighted average lease expiry (WALE) of approximately 11 years. That means that the business has quite a lot of rental earnings visibility. The rental income is contracted to grow by either a fixed 2.5% per annum or it’s linked to CPI inflation, plus market reviews.

With that rental growth, management have a goal of increasing the ASX dividend share’s distribution for investors each year by 4%. It has been successful with that goal after listing several years ago.

Indeed, the business has forecast a distribution for FY22 of 11.73 cents, equating to a forward yield of around 4.6%.

Rural Funds looks to increase the valuation and usefulness of its farms by investing in productivity. For example, at its cattle farms it has invested in water points, pasture improvement, cultivation areas and grazing areas. At other farms it’s investing in plantings, water storage and irrigated cropping.

In FY21 the ASX dividend share increased its adjusted net asset value (NAV) to $2.01 per unit, which was an increase of 4%. The gearing of the REIT was 30% at the end of the first half of FY21, which was at the low end of the target range of 30% to 35%.

Accent Group Ltd (ASX: AX1)

Accent is a footwear retailing business with sells through various stores and brands in Australia including Platypus, Hype, Trybe, The Athlete’s Foot, Glue Store, Skechers, Dr Martens, VANS, Timberland and CAT.

The ASX dividend share has been generating a lot of margin growth and online sales growth, leading to profit growth. Whilst total sales increased 6.6%, net profit after tax (NPAT) rose 57.3%. Digital sales increased by $110% to $108.1 million, representing 22.3% of sales.

HY21 saw the gross profit margin rise 140 basis points. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 44%.

The company is looking to keep growing its store network. In the first half it opened 50 new stores, ending with 565 stores. It’s expecting to open a total of at least 90 stores in FY21 with continued “strong” store openings expected in FY22.

Accent CEO Daniel Agostinelli explained the company’s success and focus on shareholder returns:

Accent’s integrated digital capability, large and growing store network, strong portfolio of exclusive distributed brands and emerging capability in building new business formats and vertical products continues to drive strong sales and margin growth. The management team remains focused on driving digital growth and innovation. With long-term objectives and incentives linked to driving at least 10% compound earnings per share growth, Accent continues to be defined by strong cash conversion and the consistently strong returns it delivers on shareholders’ funds.

In HY21 the ASX dividend share grew its dividend by 52.4% to 8 cents per share. According to Commsec’s FY21 forecast for the Accent dividend per share of 12.5 cents. That puts the forward grossed-up dividend yield at 6.4%.

The post 2 ASX dividend shares that could be buys with yields above 4% appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Treasury Wine Estates Limited. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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