1 under-$10 ASX dividend stock to buy for monthly passive income

A man sleeps in a bed with white sheets while holding a teddy bear and a smile on his face.A man sleeps in a bed with white sheets while holding a teddy bear and a smile on his face.

There are some amazing dividend yields on offer out of the ASX at the moment.

But many of those stocks are expensive. 

For example, JB Hi-Fi Limited (ASX: JBH) and Rio Tinto Ltd (ASX: RIO) are handing out mouth-watering 7.7% and 8.6% yields at the moment but cost around $45 and $122 per share respectively.

So are there any cheapies out there that could net you a tidy income?

Here’s a cheap ASX stock pumping out dividends

Adairs Ltd (ASX: ADH) is a homewares retailer with a $377 million market capitalisation.

The stock is currently paying out an awesome dividend yield of 8.2%.

And the great thing is that investors can grab the shares for under $10. The Adairs stock price closed Wednesday at $2.18, to be down around 3% year to date.

The retailer stock is trading at around a bargain-basement price-to-earnings ratio of 7.7.

At an 8.2% yield, the income from Adairs shares would easily pay for the typical mortgage repayments, which currently hover just around 5% to 6% per annum. 

Then you’d have money left over for a nice holiday, or reinvestment.

Even with just a $50,000 investment, Adairs will provide a tidy $342 of passive income each month. The dividend is 100% franked, so that amount could be even more depending on your tax circumstances.

How reliable is the business though?

The worry with a small cap paying out such handsome payouts might be that it could be a trap. Is the share price or dividend level at risk of collapse?

According to The Motley Fool’s Sebastian Bowen, Adairs is “far from” a dividend trap.

“It has recently declared an interim dividend of 8 cents per share, matching last year’s payout,” he said.

“Adairs just reported sales growth of 34.1% and an increase in net profit after tax of 23.9% to $21.8 million. This indicates its business model is growing healthily, which means the dividends should keep flowing.”

Among the professional community, the sentiment is mostly positive on Adairs. 

According to CMC Markets, four out of nine analysts currently rate the stock as a buy, while the rest reckon it’s a hold.

The platform also forecasts a dividend yield of 7.3% and 7.6% for each of the coming two years.

The post 1 under-$10 ASX dividend stock to buy for monthly passive income appeared first on The Motley Fool Australia.

Should you invest $1,000 in Adairs Limited right now?

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Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Adairs Limited wasn’t one of them.

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See The 5 Stocks
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Motley Fool contributor Tony Yoo 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 Adairs. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool Australia has recommended Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/ir2dXe8

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