2 bountiful ASX dividend shares rated as buys by brokers

There are a handful of ASX dividend shares that have been rated as buys by dividends. These businesses offer bountiful payouts and could pay even bigger payments in FY21.

Stocks with good yields are in higher demand at the moment because of how low official interest rates are right now.

Brokers have picked out these two ASX shares as ideas:

Waypoint REIT Ltd (ASX: WPR)

Waypoint is Australia’s largest real estate investment trust (REIT) that is a pure play on fuel and convenience retail real estate.

It’s currently rated as a buy by the broker Morgans, it has a price target on the ASX dividend share of $2.94.

Morgans liked how Waypoint REIT’s income kept flowing from tenants in FY20 despite all of the COVID-19 impacts. In FY20 Waypoint was able to grow its distributable earnings per security (EPS) by 4.25% to 15.15 cents.

In FY21, the REIT is expecting to grow its distributable EPS by 3.75% to 15.72 cents. The expected FY21 growth is primarily underpinned by fixed 3% rent increases across the majority of the portfolio. That includes the sale of $20 million to $30 million of non-core assets, but assumes no acquisitions.

At 31 December 2020, its net tangible assets (NTA) per security was $2.49 – an increase of 8.7% over the prior corresponding period. The current share price is trading at around that NTA.

In FY21, Morgans is expecting Waypoint REIT to pay a distribution of 15.7 cents per security, translating to a distribution yield of 6.3%.

Inghams Group Ltd (ASX: ING)

Inghams is one of the largest poultry businesses in Australia and New Zealand. It has national networks of processing and distribution facilities.

The board of Inghams recently decided to change its dividend payout ratio policy to be in a range of 60% to 80% of underlying net profit after tax (NPAT). That means that it might be more attractive for dividend investors.

In the ASX dividend share’s FY21 half-year result, poultry volume growth was 4%, with total revenue growth of 4.6% and total poultry revenue growth of 6.1%.

Underlying net profit after tax (NPAT) before AASB16 changes grew 10.7% to $46.5 million. The interim dividend was increased by 2.7% to 7.5 cents. Growth of profit allows for the sustainable growth of the dividend.

In terms of the company’s outlook, it said that it will continue to focus on the execution of its five-year strategy to deliver more consistent, predictable and reliable returns to shareholders.

Inghams said the net impact of lower feed prices is expected to be modest in the second half, given the recent surge in international demand and customer cost pass through mechanisms.

The broker Citi rates Inghams as a buy, though it pointed to the Woolworths Group Ltd (ASX: WOW) contract negotiation as a potential headwind. The price target is $4.40 and it expects Inghams to pay a grossed-up dividend yield of 6.2% in FY21.

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• Brokers think these ASX 200 shares will outperform the market

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. 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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