Some ASX dividend shares are expected to pay large dividends over the next year and they are rated as buys by brokers.
Businesses that have pretty high dividend payout ratios and reasonable valuations can offer investors large dividend yields.
A business isn't worth owning for income just because it pays a dividend. The outlook and price also needs to make sense.
These two ASX dividend income shares could fit the requirements:
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Rio Tinto Limited (ASX: RIO)
Rio Tinto is one of the biggest iron ore miners. It's currently rated as a buy by a few different brokers including Citi.
The broker reckons that Rio Tinto is going to pay a grossed-up dividend yield of 10.9% in FY22.
The ASX dividend share is Citi's favourite in the large mining sector. It has also noted the green initiatives that the business is pursuing so that it's responsible for less emissions.
Based on the FY22 estimated earnings, Rio Tinto is valued at 7x FY22's projected bottom line.
Rio Tinto continues to produce huge amounts of iron ore in Australia. Its quarterly update for the three months to September 2021 showed it produced 83.3mt, which was 4% lower than same quarter in 2020, but 10% higher than the second quarter of 2021.
In the first nine months of 2021, it produced 235.6mt, which was 5% lower than the first nine months of 2020. It's expecting Pilbara shipments to be in the range of 320mt to 325mt.
Whilst the iron ore price has fallen significantly over the last few months, other commodities that it's involved with are seeing high prices, including aluminium and copper.
HomeCo Daily Needs REIT (ASX: HDN)
This business, as the name suggests, is a real estate investment trust (REIT) which owns a portfolio of predominately metro-located, convenience based properties across target sub-sectors of neighbourhood retail, large format retail and health and services.
It's currently rated as a buy by the broker Morgans, with a price target of $1.69. Morgans thinks the ASX dividend share could pay a yield of 5.5% in FY22.
One of the reasons for the buy rating is the material upside seen with the merger with ASX share Aventus Group (ASX: AVN).
This merger is expected to enhance the combined entity's credit profile, improve the ability to access debt, increase rental profit per unit, provide a significant landbank located in key locations and there is an opportunity to accelerate the development pipeline.
HomeCo Daily Needs REIT chair Simon Shakesheff said:
We believe the merger is strategically and financially attractive for both HomeCo Daily Needs REIT and Aventus Group and consistent with HomeCo Daily Needs REIT's objective to deliver stable and growing distributions. The increased scale and enhanced capability will allow the merged group to unlocked significant value that would not have been accessible on a standalone basis.
