2 ASX dividend shares rated as buys by brokers

There are a group of ASX dividend shares that are expected to pay a high dividend yield and are also rated as a buy by brokers.

Just because a business pays a dividend, particularly a large one, doesn’t automatically make it a good stock to own.

Brokers are also on the lookout for opportunities that are valued at a good price for investors.

That’s why the brokers have picked out these two ASX dividend shares:

Harvey Norman Holdings Limited (ASX: HVN)

The retailer Harvey Norman is one of the ASX dividend shares rated as a buy.

One of the brokers that likes Harvey Norman is Citi, which has a price target on the retailer of $6. Citi feels that the current COVID-19 restrictions around the country will hurt some demand, though there is still stronger-than-normal demand for household goods.

But over the longer-term, Citi believes that demand and profit will start to go back to more normal levels.

On Citi’s numbers, the Harvey Norman share price is valued at 15x FY22’s estimated earnings with a projected grossed-up dividend yield of 9.1%.

In the first six months of FY21, Harvey Norman revealed that reported profit before tax had more than doubled, up 113.8%, to $643.9 million. Underlying net profit after tax increased by 115.8% to $438.2 million.

The company continues to see international growth. HY21 offshore company-operated Harvey Norman retail sales revenue grew by 21.8% to $1.36 billion.

APA Group (ASX: APA)

APA is one of the other ASX dividend shares that brokers also like.

If readers haven’t heard of APA before, it has 15,000km of natural gas pipelines that connect sources of gas supply and markets across Australia. It operates and maintains networks connecting 1.4 million Australian homes and businesses to natural gas, supplying half of the nation’s usage.

APA also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms).

It’s rated as a buy by the broker UBS, with a price target of $11.20. That suggests that the share price could rise by over 10%.

The broker believes APA is placing itself in a good position to capitalise on the billions of dollars of energy opportunities over the next two decades in the renewable energy space as well as electricity transmission. APA points to $40 billion of renewable energy opportunities and $20 billion of electrification opportunities in Australia.

The US is another area of potential growth. There are US$2.7 trillion of investment opportunities there to 2040, those opportunities break down to $125 billion of gas pipeline infrastructure, $1.6 trillion of renewables and firming, and US$1 trillion of electrification.

The ASX dividend share also points to the hydrogen economy, with US$11 trillion of potential investments worldwide to 2050.

UBS estimates that APA will pay a distribution of 55 cents per security in FY22. That translates to a potential FY22 distribution yield of 5.6%.

The post 2 ASX dividend shares rated as buys by brokers appeared first on The Motley Fool Australia.

More reading

• Why the Harvey Norman (ASX:HVN) share price is up 9% in a month
• 2 ASX shares that could keep growing the dividend every year
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• These ASX 200 CEOs have the most wealth tied up in their companies
• COVID Delta is raging: 4 ASX shares to buy in turbulent times

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 APA Group. The Motley Fool Australia has recommended Harvey Norman Holdings Ltd. 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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