Pengana and 360 Capital REIT are 2 small ASX shares with large dividend yields.
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Some of the small ASX shares actually have quite larger dividend yields.
Just because a business is smaller doesn’t mean that it can’t pay a large dividend. The yield is dictated by the payout ratio and the valuation.
Plenty of the businesses in the S&P/ASX 200 Index (ASX: XJO) were smaller companies on the ASX at some point. Starting from a smaller base may give them a longer growth runway with their earnings as well.
Here are two small ASX dividend shares with large yields:
360 Capital REIT (ASX: TOT)
This is a diversified real estate investment trust (REIT). It’s one of the positions in the Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) financial services portfolio.
It has the ability to invest across most assets in the real estate world. At the moment it has two large strategic holdings in Australian REITs. One holding is 9.2% of Irongate Group (ASX: IAP). Another holding is Peet Limited (ASX: PPC).
Peet is a residential developer that delivers master planned communities, medium density housing and apartments.
Irongate is a diversified real estate investors with real estate assets and a third-party funds management platform. Irongate owns office and industrial assets across Australia and New Zealand.
Another of the small ASX dividend share’s recent investments include buying half of PMG Group, a New Zealand based diversified commercial real estate funds management business. At the time of the acquisition, PMG managed five unlisted funds, three single-property syndicates, with 42 properties and NZ$665.7 million of funds under management (FUM).
360 Capital says PMG gives the business an investment in a growing funds management platform with a long track record and diversification through exposure to the New Zealand real estate market. It provides fee income from funds management and underwriting activities.
Its longer-term objective is owning direct assets and value-add opportunities on the balance sheet. Initially, it’s getting exposure to this through strategic investments in real estate funds management platforms.
The small ASX dividend share’s annual distribution for FY21 is 6 cents per share. That trailing payment reflects a yield of 6.25%.
Pengana Capital Group Ltd (ASX: PCG)
Pengana is another business in the Soul Patts financial services portfolio.
It’s a fund manager with a diverse array of funds that it manages. Pengana has strategies relating to international shares, ASX shares, private equity, property and ethical shares.
At 30 June 2021, its FUM had grown to almost $4 billion (the exact number was $3.974 billion). At 31 December 2020, the FUM was $3.6 billion. So the FUM had grown by 10.6% over the prior six months. FUM is an important part of generating revenue for Pengana in the form of management fees.
In the six months to 30 June 2021, the small ASX dividend share generated gross performance fees of $17.3 million. That brought total gross performance fees earned for FY21 to $27.6 million. However, those numbers are before payments to the fund manager teams and bonuses.
The FY21 half-year result saw FUM increase by 15% in the first six months of the financial year. This helped underlying profit before tax increase by 17.1% to $9.2 million.
Pengana declared an interim dividend of 5 cents per share, an increase of 25%. The current trailing dividend is 9 cents per share, meaning it has a trailing grossed-up dividend yield of 7.6%.
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Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. 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 Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.