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3 small cap ASX shares with large dividends

There are some small cap ASX shares that have large dividend yields. One example is Pacific Current Group Ltd (ASX:PAC) with a 8.3% yield.
The post 3 small cap ASX shares with large dividends appeared first on Motley Fool Australia. –

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Some small cap ASX shares have large dividends, it’s not just the large ASX shares that have large dividends.

The definition of a small cap can vary between investors. The three small cap ASX shares in this article have a market capitalisation of under $500 million and a dividend yield of more than 6%:

Pacific Current Group Ltd (ASX: PAC)

Pacific describes itself as a multi-boutique asset management firm. It says that it applies its strategic resources, including capital, institutional distribution capabilities and operational expertise to help its investments in asset managers. At the end of September 2020 it had investments in 15 asset managers globally.

The company reported that in the three months to 30 September 2020 it increased its funds under management (FUM) by 14% to $106.4 billion. Management said that the quarter was quiet in terms of flows, although there were notable inflows for GQG and Roc. In native currencies, US dollar orientated fund managers saw FUM increase by 19.3%.

In the FY21 first quarter announcement, Pacific Current CEO Paul Greenwood said: “COVID-19 has certainly been disruptive to institutional fundraising and investor demand. Thankfully the environment appears to be steadily improving, though we are still a long way from pre-pandemic levels of activity. The vast majority of FUM growth during the period came from GQG, which continues to grow exceptionally rapidly.”

In FY20, Pacific Current grew its dividend by 40% to $0.35 per share. At the current Pacific Current share price, that amounts to a grossed-up dividend yield of 8.3%.

Duxton Water Ltd (ASX: D2O)

Duxton Water is a unique company on the ASX, it purely owns water entitlements and leases them to farmers. It can enter into both short-term and longer-term contracts with those agricultural businesses.

Shareholders are exposed both to the lease income of the water as well as the capital growth of the value of the water entitlements.

Duxton Water’s board has been steadily growing its dividend over the past few years. The small cap ASX share has also provided guidance of consistent dividend progression from the latest payment of 2.9 cents per share all the way to a final FY21 dividend of 3.2 cents and an interim dividend for FY22 of 3.3 cents per share.

Based on those two projected payments, that amounts to a grossed-up dividend yield of 6.7%.

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is an agricultural real estate investment trust (REIT) which owns some of the largest berry and citrus farms in Australia.

It receives two forms of rent from its major tenant, Costa Group Holdings Ltd (ASX: CGC). It receives a fixed rent as well as variable rent in the form of a profit share from those farms.

The variable rent has been impacted recently by a number of issues including crumbly berries, fruit flies and drought. Management believe all of these issues have been addressed.

In FY20 its funds from operations (FFO) – its net rental profit – fell 16.2%. The small cap ASX share paid a distribution of 4.75 cents per share, which amounts to a distribution yield of 6.1%.

Vitalharvest has a new manager with Primewest Group Ltd (ASX: PWG) taking over management. Primewest is going to look for agricultural properties that provide more consistent rent like food processing and food storage properties.

Primewest believes that the agricultural sector will outperform other real estate classes in the current environment.

The director of Primewest Agrichain Management, David Schwartz, said: “Continued demand from export markets for quality agricultural products will drive future performance. Improvement in climactic conditions may have a positive influence on production, also increasing maturity of the citrus planted area should support a natural increase in yields over the period.”

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Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended DUXTON FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 3 small cap ASX shares with large dividends appeared first on Motley Fool Australia.

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