3 cheap ASX dividend shares (down more than 35%) to buy in February 2023

When share prices go down, I get excited by the opportunity to buy cheap ASX dividend shares at attractive prices.

Inflation and interest rates may have punished many valuations last year, but some have come soaring back. Look at the WiseTech Global Ltd (ASX: WTC) share price and the Lovisa Holdings Ltd (ASX: LOV) share price, both up more than 20% over the past 12 months.

Yet, other names are still trading at steep discounts to where they were a year to 18 months ago.

While the short term may seem uncertain, I think the long term is still positive for the below ASX dividend shares. With their significantly lower share prices, I think these names look like opportunities, with the share prices reflecting the possible short-term pain.

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the leading retailers of furniture in Australia. Not only does the company have the Nick Scali business, but it also owns the Plush brand as well.

Since mid-November, the Nick Scali share price has dropped by more than 35%, which has significantly improved the dividend yield on offer.

Ongoing demand for furniture meant that the FY23 first-half net profit increased by 70%, while the interim dividend per share increased 14.3% to 40 cents.

Commsec numbers currently suggest the ASX dividend share could pay a grossed-up dividend yield of 10.2% in FY23.

With the company’s longer-term plans to roll out more stores (particularly Plush stores), grow its online sales (which are very profitable), and expand its ranges, I think Nick Scali has a promising future once we’re through this difficult economic period.

Pinnacle Investment Management Group Ltd (ASX: PNI)

Pinnacle is a business involved in funds management. It doesn’t manage money itself, rather the ASX dividend share operates by taking sizeable minority stakes in young (or new) funds management businesses and helping them grow.

The company can take care of a number of operational tasks for the fund managers such as legal, distribution services, seed funds under management (FUM), compliance, and so on. It enables the fund manager to focus on the investing side of things.

The Pinnacle share price has fallen more than 45% since November 2021. Investment markets have cooled significantly since then. However, I think this is only going to be a shorter-term headwind. I believe that investors will begin allocating new money to fund managers again in FY24 when interest rates have stopped rising.

Commsec estimates suggest that Pinnacle could pay a grossed-up dividend yield of 4.6% in FY23.

Beacon Lighting Group Ltd (ASX: BLX)

Beacon is a leading retailer of lights and fans. It’s another company to have suffered significant pain from the start of 2022.

Since mid-January 2022, the ASX dividend share has dropped by more than 35%. I think it’s understandable that there has been some pain because of the possibility of fewer homes being built, fewer renovations, and so on during this period.

However, I don’t think the business is worth 35% less than before, particularly with its long-term growth plans of servicing more trade customers, growing its Australian store count from around 120 to more than 180, selling more stuff online, and growing internationally (including in the US).

In FY23, the ASX dividend share could pay a grossed-up dividend yield of 6.7%.

The post 3 cheap ASX dividend shares (down more than 35%) to buy in February 2023 appeared first on The Motley Fool Australia.

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More reading

• Why right now is a once-in-a-decade opportunity to make passive income from ASX shares
• Why ARB, Centuria Capital, Nick Scali, and Tabcorp shares are dropping
• ASX share prices have rallied too hard to start 2023 says UBS equity strategist as one US analyst says don’t even think about turning bullish until 2024
• Why Brainchip, Core Lithium, IAG, and Nick Scali shares are dropping today
• Nick Scali share price plummets despite 70% profit boost

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 positions in and has recommended Lovisa, Pinnacle Investment Management Group, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group and WiseTech Global. The Motley Fool Australia has recommended Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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