There are plenty of ASX dividend shares that everyone knows. But there are also some ideas that may be underrated for income potential.
But these two are also expected to pay sizeable dividends in FY22 and beyond:
JB Hi-Fi Limited (ASX: JBH)
This company is one of the largest retailers in Australia with its networks of JB Hi-Fi stores and The Good Guys stores. It sells a wide range of products like computers, smartphones appliances and so on. Whilst this is often seen as discretionary spending, they are widely accepted as essential items to living in 2022.
The ASX dividend share is expected by the broker Credit Suisse to pay a grossed-up dividend yield of 7.4% in FY22.
JB Hi-Fi’s second quarter of FY22 showed sales growth of 1.2% for JB Hi-Fi Australia and 2.8% growth for The Good Guys. The company is expecting to report net profit after tax (NPAT) of $287.9 million – that would be a year-on-year decline of 9.4%, but up 68.8% over two years.
The company points to five unique competitive advantages – scale, a low-cost operating model, quality store locations, supplier partnerships and multichannel capability (which includes booming online sales).
Credit Suisse thinks the JB Hi-Fi share price is valued at 13x FY22’s estimated earnings.
Metcash Limited (ASX: MTS)
Metcash is one of the largest suppliers to independent supermarkets and liquor stores. Some of the liquor retailers it supplies includes Cellarbrations, The Bottle-O, IGA Liquor, Duncans, Thirsty Camel, Big Bargain and Porters. The supermarkets it supplies include the IGA and Foodland brands.
The ASX dividend share also has a few hardware businesses, including Mitre 10, Home Timber & Hardware and Total Tools. This hardware division is the segment that’s driving profit. The FY22 half-year result saw group earnings before interest and tax (EBIT) rise by 13.9% to $231.2 million. But the hardware EBIT jumped 53.3% to $98.9 million.
Metcash is working on a number of things to grow its profitability including improving its efficiencies, investing in distribution centres and advancing its digital sales. In HY22 it made around $60 million of online sales, up 46% year on year.
In terms of the dividend, the board has committed to a target dividend payout ratio of around 70% of underlying profit after tax. Metcash says that it has a strong focus on shareholder returns. The interim dividend was grown by 31% to 10.5 cents per share.
It’s currently rated as a buy by Credit Suisse, with a price target of $4.55. On the FY22 numbers projected by the broker, Credit Suisse reckons the Metcash share price is valued at 14x FY22’s estimated earnings with a grossed-up dividend yield of 6.9%.
The post 2 strong ASX dividend shares hiding in plain sight appeared first on The Motley Fool Australia.
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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 has no position in any of the stocks mentioned. 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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