2 beaten-up ASX dividend shares I’d buy for long-term income

Some ASX dividend shares are trading at a cheaper price than they used to be. This could be an opportunity to buy them at a lower price and get a higher dividend yield.

If a business with a 5% dividend yield falls 10% and the dividend payment stays the same then the dividend yield becomes 5.5%. If it dropped 20% the yield would become 6%.

Dividends and distributions are not guaranteed, but businesses that say they are committed to payouts could be more likely to continue paying shareholders.

With that in mind, here are two ASX dividend shares where I think the yield and share price look good.

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that owns a portfolio of farms that are diversified by geography, climactic conditions and farm type.

The types of farms it owns include almonds, macadamias, vineyards, cropping (sugar and cotton) and cattle.

The Rural Funds share price has fallen by around 30% over the past year and 20% in the last six months.

It’s understandable why that has happened. Higher interest rates can hurt a REIT’s property values, and hurt the rental profit due to higher interest costs.

However, I think the lower Rural Funds share price makes up for this new environment, plus the rental income that’s linked to inflation is getting a helpful boost.

The ASX dividend share aims to increase its distribution by 4% per year for investors. If the total FY24 distribution is increased by 4%, this would represent a distribution yield of approximately 6.2%.

I think farms will continue to be useful assets beyond the foreseeable future. There’s no shift to e-commerce farming or work-from-home farming to affect this segment of the REIT industry.

Medibank Private Limited (ASX: MPL)

Medibank is one of the largest private health insurers in Australia. Last year it suffered from a cyber attack and this sent the Medibank share price down as investors worried about policyholder losses.

Medibank shares have recovered but are still down by 7% over the last six months. That’s interesting considering Medibank’s underlying health insurance profit has been increasing and it can now earn stronger returns on its bond investment portfolio.

In the first six months of FY23, the health insurance operating profit increased by 8.7% to $305.2 million, while the group operating profit improved by 7.4% to $307.8 million. Its net investment income increased by 80.9% to $55.9 million.

It revealed that its net resident policyholders grew by 0.1%, or 1,700, while the net non-resident policy unit growth was 17%, or 33,400. It still achieved growth despite the cyber issues.

The ASX dividend share decided to increase its interim dividend by 3.3% to 6.3 cents per share.

With the latest two dividends, Medibank has a grossed-up yield of 5.9%.

The post 2 beaten-up ASX dividend shares I’d buy for long-term income appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Rural Funds Group. 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 positions in and has recommended Rural Funds Group. 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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