2 ASX dividend shares rated top buys by brokers

These 2 ASX dividend shares are expected to pay sizeable dividends.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • Brokers have named two ASX dividend shares as opportunities for investors 
  • One pick is Adairs, the homewares and furniture retailer business 
  • Electronics and home appliance retailer JB Hi-Fi is another buy-rated business 

ASX dividend shares are able to pay investors a higher level of income than some other types of assets.

Businesses can choose to pay out a high level of their profit or cash flow each year to shareholders. When combined with capital growth, it can lead to pleasing total returns.

But a company isn't necessarily worth buying just because it pays a dividend. Analysts have rated these ASX dividend shares as a buy, with expectations of sizeable future dividends:

two children dressed in business attire with joyous, wide-mouthed expressions count money at a desk covered in cash and sacks of money either side.

Image source: Getty Images

Adairs Ltd (ASX: ADH)

Adairs is a retail ASX share that runs three different businesses – Adairs, Mocka and Focus on Furniture.

Since the start of 2022, the Adairs share price has sunk 30%. However, the decline of a valuation can have the benefit of an increasing potential dividend yield.

The broker Morgans currently rates Adairs as a buy, with a price target of $3.50. That's more than 20% higher than where it is today.

How big could the dividends be? Morgans is expecting a grossed-up dividend yield of 9.6% in FY22 and a grossed-up dividend yield of 13.2% in FY23. Profit is expected to bounce back in FY23 after the COVID-19 lockdowns during the first half of FY22.

Adairs plans to grow future profit in several ways. It is going to upsize some of its stores, which are materially more profitable than smaller stores. Adairs wants to add more stores to its network, particularly with the newly acquired Focus on Furniture.

The ASX dividend share also wants to save costs and fulfil more online orders with its new national distribution centre. This new distribution centre is expected to save more than $3 million of annual expenses.

Morgans' forecasts suggest that the Adairs share price is valued at 7x FY23's estimated earnings.

JB Hi-Fi Limited (ASX: JBH)

Despite all of the volatility in 2022, the JB Hi-Fi share price has actually gone up this year. But only just, with a rise of 1.3%.

Morgans also thinks that JB Hi-Fi is a buy, with a price target of $57. That suggests a possible rise of 15% over the coming year, if the broker's prediction comes true.

The broker was impressed by JB Hi-Fi's half-year result, with profitability stronger than expected. Morgans thinks the ASX dividend share is a very capable business with good competitive advantages.

For readers that missed the interim result last month, total sales fell 1.6% to $4.86 billion and net profit after tax (NPAT) dropped 9.4% to $287.9 million. The interim dividend was reduced by 9.4% to $1.63 per share. JB Hi-Fi also announced a capital return of up to $250 million through an off-market buyback.

The retailer reported that in January 2022 it continued to see heightened demand. Compared to January 2021, JB Hi-Fi Australia sales were up 3.6% and The Good Guys sales increased 1.9%.

In terms of the expected dividend payouts, Morgans has estimated a grossed-up dividend yield of 7.5% for FY22 and 6.9% in FY23.

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. owns and has recommended ADAIRS FPO. The Motley Fool Australia owns and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Dividend Investing

Man holding fifty Australian Dollar banknotes in his hands, symbolising dividends.
Dividend Investing

3 top ASX dividend share buys for passive income in April

These are my top picks for dividends right now.

Read more »

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Broker Notes

Are CBA shares still a good buy for passive income?

A leading analyst delivers his verdict on CBA’s passive income appeal.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Dividend Investing

2 defensive ASX dividend stocks for reliable income

I'd have these two defensive dividend shares in my portfolio to help hedge against sharemarket volatility.

Read more »

Woman holding $50 and $20 notes.
Dividend Investing

21 ASX shares going ex-dividend over the school holidays

Shares going ex-dividend include Myer and Washington H. Soul Pattinson & Company.

Read more »

Person handing out $100 notes, symbolising ex-dividend date.
Dividend Investing

$500 buys 148 shares in this 11% yielding ASX income stock!

I'd add this ASX income stock to my portfolio.

Read more »

A retiree relaxing in the pool and giving a thumbs up.
Dividend Investing

Looking for long-term passive income? Try one of these ASX shares

These businesses are on track to provide investors with ultra-long-term income.

Read more »

A man in a business suit stands on top of an office chair in a sea of murky water with shark fins circling.
Dividend Investing

Thinking of buying WAM Capital shares for the 9% dividend yield? Read this first

Look before you leap into this dividend stock.

Read more »

Person with a handful of Australian dollar notes, symbolising dividends.
Dividend Investing

1 ASX dividend share and 1 ASX growth stock to buy in April

These ASX shares deliver a one-two punch: income now, growth later.

Read more »