As inflation drives the cost of living higher, many are turning to passive income shares for returns.
Thankfully, as an Australian investor, you're in the right place. There are plenty of ASX shares across all sectors paying chunky dividends to their shareholders, year after year.
As we've noted before, dividends hedge against inflation, offer tax advantages (thank you, franking credits!) and provide a second source of investment return.
Here are two passive income shares that experts think are fundamentally sound and poised to carry dividend yields of 9%.
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Incitec Pivot Ltd (ASX: IPL)
First on the list of passive income shares is fertiliser and chemicals company Incitec Pivot.
The company recently returned a mammoth $500 million of cash to its shareholders following the sale of its ammonia manufacturing plant to CF Industries Holdings Inc (NYSE: CF) in 2023.
In response, shareholders received two returns – one a 15.57 cents per share equal capital reduction, followed by an unfranked special dividend of 10.17 cents per share.
This is great – but we are talking a trailing yield here. Can Incitec continue this trend?
The team at Atlas Funds Management believe so. After the plant sale, the fund manager is bullish on Incitec's potential to return capital to shareholders.
"Additional capital returns could result from selling the Australian fertiliser operations as the company becomes a pure-play explosives company," it said in a recent note.
The global explosives market is tipped to grow more than 6% per year from 2024 to 2030, reaching a value of $543 billion. Atlas' view is another potential catalyst for Incitec after it posted its second-highest net profit after tax (NPAT) of $582 million in FY 2023.
A strong market and strong earnings are two flavoursome ingredients to any dividend recipe.
Atlas also said the company was "expected to conduct a $0.26 per share capital return".
At the recent Incitec Pivot share price of $2.79 per share, this return of 26 cents equates to a 9.3% forward dividend yield, which cannot be ignored, in my opinion.
Accent Group Ltd (ASX: AX1)
A second contender on the list of passive income shares is footwear retailer Accent Group.
Accent boasts an extensive portfolio of well-known retail brands, including The Athletes Foot, Platypus, Glue Store, and Hype DC, just to name a few.
The company is well-positioned to continue its growth route after posting sales of $810.9 million in its H1 FY 2024 financial results. Average sales were around $912,000 per store after it added 72 new sites in H2 FY 2023, bringing its total to 888 locations.
You would receive a 7.43% dividend yield as passive income in buying Accent shares today – assuming no changes to the company's dividend, of course.
But we don't get paid for what's already happened. What's to come?
Both JP Morgan and Bell Potter Securities have price targets of $2.20 per share on Accent following a sharp pullback in its stock. Analysts at JP Morgan see the company opening another 20 stores in the second half of FY 2024. This would bring its total to more than 900.
Meanwhile, Bell Potter believes this passive income share could pay dividends of 13 cents apiece this year, bringing the yield to 7.1%. But with the dividend franked at 100%, this brings the gross yield above 10%.
Investors would receive a 19.6% return if the company were to hit the $2.20 price target from today. This rises to 26.6% total return if Accent pays the 13 cent dividends per share this year. Under this scenario, a $1,000 investment would be valued at $1,260.
