Brokers: Buy these 2 underrated ASX dividend shares

ASX dividend shares have the ability to boost the amount of investment income that an investor receives.

There are some companies which have boards that want to pay a fairly high level of profit out to shareholders each year.

These are two of those dividend payers, which brokers like:

Metcash Limited (ASX: MTS)

Metcash has three different divisions.

It supplies food to independent supermarkets, such as IGA.

Metcash supplies a wide array of independent liquor, including Cellarbrations, The Bottle-O, IGA Liquor, Duncans, Thirsty Camel, Big Bargain and Porters.

The ASX dividend share also has a hardware division which includes Mitre 10, Home Timber & Hardware and Total Tools.

Metcash has committed to paying out a certain level of profit. Its target dividend payout ratio is around 70% of underlying net profit after tax (NPAT).

The result for the six months to October 2021 saw Metcash achieve revenue growth of 1.3% to $7.2 billion. Group underlying earnings before interest and tax (EBIT) grew by 13.9% to $231.2 million. But within the total, food EBIT fell 7.6% to $95.2 million, liquor EBIT rose 10.5% to $44.3 million and hardware EBIT surged 53.3% to $98.9 million. Hardware is now the biggest profit generator for the business.

It’s currently rated as a buy by Credit Suisse. Based on the dividend estimate for FY22, the projected grossed-up dividend yield is 6.9%.

Bank of Queensland Limited (ASX: BOQ)

BOQ is one of the challenger banks on the ASX. It operates three different brands – BOQ, ME Bank and Virgin Money Australia.

The ASX dividend share is currently working through extracting synergies from the ME Bank acquisition which will increase the profitability of the business. BOQ is now more geographically diverse with the inclusion of ME Bank.

In December, the company reconfirmed its FY22 guidance of at least 2% ‘positive jaws’. It said that growth momentum has continued through the first quarter of FY22, with “strong” application volumes across both housing and business lending portfolios.

However, the bank noted that the industry had experienced net interest margin (NIM) headwinds in the first quarter due to tougher trading conditions, including yield curve volatility, intense price competition, fixed-rate lending and higher liquid asset balances. The ASX dividend share said this will result in a slightly lower FY22 NIM than previously guided.

It’s currently rated as a buy by the broker Morgans, with a price target of $11. Based on the broker’s dividend projection for FY23, BOQ has an estimated forward grossed-up dividend yield of 9.3%.

The post Brokers: Buy these 2 underrated ASX dividend shares appeared first on The Motley Fool Australia.

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• Bargain buy? Broker tips Bank of Queensland (ASX:BOQ) share price to rise 37%
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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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