2 leading ASX dividend shares for compelling income

Rural Funds is a potential option for income.
The post 2 leading ASX dividend shares for compelling income appeared first on The Motley Fool Australia. –

There are some high-quality ASX dividend shares that may compelling options for long-term income.

A handful of businesses have committed to paying investors with high levels of income.

There are more options out there than just the biggest ASX companies like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Scentre Group (ASX: SCG).

These two ASX dividend shares could be options for income:

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that owns a large and growing portfolio of farming properties across the country.

It has a goal of growing the distribution by 4% each year for investors, which it has done so for a number of years since it listed. That goal is driven by contracted rental increases as well as productivity investments.

Rural Funds has farms across a number of sectors: cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).

The ASX dividend share regularly adds to its portfolio. At the end of November 2021, it announced another acquisition. It’s buying 27,879 hectare of cattle and cropping farms across four properties in Queensland.

Those acquisitions have the potential for productivity improvements. Included in the purchase is 12,448 ML of water entitlements, which will be used to improve the productivity, including expanding irrigated cropping areas and increasing cattle carrying capacity through pasture improvement and additional water points.

Rural Funds is expecting to pay a FY22 distribution of 11.73 cents per unit, translating to a distribution yield of 4%. It is expecting to generate adjusted funds from operations (AFFO) of 11.8 cents per unit in FY22.

Metcash Limited (ASX: MTS)

Metcash is a business with operations across food, liquor and hardware. It supplies IGAs across the country and also is the second biggest hardware player in the country with Mitre 10, Home Timber & Hardware and Total Tools.

It’s currently rated as a buy by the broker Credit Suisse, with a price target of $4.55.

Credit Suisse thinks Metcash is good value and could pay a grossed-up dividend yield of 7.1% in FY22. On the broker’s numbers, the Metcash share price is valued at 15x FY22’s estimated earnings.

The ASX dividend share did just report its FY22 half-year result, which came with a 31% increase to the interim dividend to 10.5 cents per share after a 15% increase to underlying earnings per share (EPS) to 14.6 cents.

Metcash says that it has a strong focus on shareholder returns. It has successfully completed its off-market buy-back of $200 million. It now has a target dividend payout ratio of 70% of underlying profit after tax.

The second half of FY22 has seen sales growth continue, with hardware sales increasing 20.1% and playing an important part in profit generation for the business.

The post 2 leading ASX dividend shares for compelling income appeared first on The Motley Fool Australia.

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Metcash (ASX:MTS) share price jumps 7% on strong half year results

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. 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. 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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