Given how low interest rates are, dividend shares remain a very popular way for investors to generate a passive income.
Fortunately, the Australian share market is not short of companies that share their profits with investors in the form of dividends. Two such shares are listed below. Here’s why analysts have given buy ratings to these dividend shares:
Inghams Group Ltd (ASX: ING)
The first ASX dividend share to look at is Inghams. Australia’s leading poultry producer is having a very tough time at the moment because of COVID-19 headwinds. This led to the release of a disappointing trading update earlier this week.
However, the team at Goldman Sachs has suggested that this could be a buying opportunity for investors. This morning it retained its buy rating with a trimmed price target of $3.90.
It commented: “We remain Buy-rated on ING as we are attracted to its relatively defensive revenue stream; duoploy industry structure; strong balance sheet and undemanding valuation. ING is trading at 13.4x our revised FY22 EPS (vs peers on an average 15.2x) and attractive 5% fully franked yield. Our revised TP offers 23% total return over 12 months.”
Goldman is then forecasting dividend yields of 6.2% in FY 2023 and 7.2% in FY 2024.
Jumbo Interactive Ltd (ASX: JIN)
Another ASX dividend share to consider is Jumbo Interactive. It is the growing online lottery ticket seller behind the OzLotteries business. In addition, it has the Powered by Jumbo software as a service business which has a significant global opportunity.
Analysts at Morgans are very positive on the company. They currently have an add rating and $20.20 price target on its shares.
Morgans commented: “While JIN has recovered strongly since its August result, we remain attracted to the strong cash generation and balance sheet optionality afforded from its core LR business (+ Oz Lotto refresh upside) and long-term growth potential of its SaaS and Managed Services business, which remain exposed to large, global addressable markets.”
The broker is forecasting fully franked dividends per share of 45 cents in FY 2022 and 52 cents in FY 2023. Based on the current Jumbo share price of $18.35, this will mean yields of 2.5% and 2.8%, respectively, for investors.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive 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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