Brokers say it's time to buy these two ASX 300 dividend shares

Nick Scali is one of the dividend shares in the ASX 300 that could be an opportunity.

| More on:
A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.

Image source: Getty Images

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

  • Both of these ASX 300 dividend shares could provide a combination of capital growth and dividends, according to brokers
  • Nick Scali is a leading furniture retailer in Australia that recently acquired Plush-Think Sofas
  • Tassal produces large quantities of salmon and prawns for domestic and international markets

S&P/ASX 300 Index (ASX: XKO) dividend shares could be a great place to start looking for income opportunities.

While the smaller ASX 300 shares have a fraction of the market capitalisation of names like Commonwealth Bank of Australia (ASX: CBA), they can offer the same size dividend yield — or even greater.

Sometimes, businesses can have particularly high dividend yields if the price/earnings (P/E) ratio is relatively low.

However, it takes more than just a dividend to make an investment a good idea. Experts have identified these two businesses as attractive options at their current prices:

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the largest retailers of furniture in Australia. It operates the Nick Scali range of stores but it also recently acquired the Plush-Think Sofas business.

It's currently rated as a buy by the broker Macquarie. The price target is $12.70, implying a possible rise of around 70% over the next year.

One of the key reasons that Macquarie likes the ASX 300 dividend share is that the large order book is expected to reduce to a more normalised level. It also likes the growth potential of Plush to add to the Nick Scali business.

Nick Scali said that some of the synergies it can extract from Plush are "aligned distribution, supplier consolidation and shared corporate infrastructure". Some of the areas of growth that management has identified in Plush include store network expansion and enhanced group buying power.

Nick Scali thinks that gross profit margins can rise by replacing half of the range with new models, having a wider range of products to generate additional volume at better margins, and utilising capacity within the company's delivery network.

Macquarie thinks that Nick Scali will pay a grossed-up dividend yield of 10.4% in FY22 and 9.6% in FY23.

Tassal Group Limited (ASX: TGR)

Tassal is one of the largest prawn and salmon producers in Australia.

It's currently rated as a buy by the broker Credit Suisse, with a price target of $4. That implies a possible rise of more than 10% over the next year.

While Tassal faces higher costs in this inflationary environment, the ability to pass those cost rises onto customers (and then some) can help maintain and grow margins. However, Credit Suisse has slightly reduced how much volume it's expecting Tassal to sell to account for higher salmon prices.

In a recent shareholder presentation, the ASX 300 dividend share said:

Investments in our infrastructure have delivered scale in salmon and growing scale in prawns, which together with pricing and mix optimisation, will drive growth in cash flows and shareholder returns.

Tassal said that salmon price re-rating will "drive stronger margins". It's looking to "optimise" its prawn operations, with further growth self-funded and only when market conditions dictate.

The company thinks there are favourable trends driving global demand higher. There is "low or no growth in supply globally for calendar years 2022 and 2023". It also pointed to international market pricing being supportive of margin increases heading into FY23.

Credit Suisse thinks Tassal is going to pay a dividend yield of 4.6% in FY22 and 4.9% 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. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Excited couple celebrating success while looking at smartphone.
Dividend Investing

Brokers say these ASX dividend shares are top buys for income

Now could be a good time for income investors to buy these shares.

Read more »

Close-up of a business man's hand stacking gold coins into piles on a desktop.
Dividend Investing

This ASX dividend share is projected to pay an 8.5% yield by FY29

The tasty payout from this business could get even bigger…

Read more »

Two kids are selling big ideas from a lemonade stand on the side of the road for cheap!
Dividend Investing

1 ASX dividend stock down 40% I'd buy right now

This business has fallen heavily in the past few years, creating a good dividend yield.

Read more »

Money rains down on a grey city pavement while business people scramble to pick it up.
Dividend Investing

2 ASX 200 shares that could make it rain dividends

These two blue-chips are offering passive income.

Read more »

CSR share price rising asx share price represented my man in hard hat giving thumbs up
Dividend Investing

Buy BHP and these ASX dividend shares next week

Analysts think the Big Australian and these income stocks are buys.

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Dividend Investing

Buy 602 CBA shares for $3,000 of passive income

Let's see what it would take to make meaningful income from the banking giant.

Read more »

Man holding Australian dollar notes, symbolising dividends.
Dividend Investing

8 ASX shares going ex-dividend next week

Want in on the action with these dividends? Better hurry.

Read more »

A woman in a hammock on her laptop and drinking a smoothie
Dividend Investing

The easiest way to receive dividends every month

Most ASX shares pay dividends only twice a year, but some ETFs are designed to deliver income every month. Here’s…

Read more »