These two ASX dividend shares can provide excellent passive income and could be solid options for capital growth, too.
The high interest rate and inflationary environment has led to some stocks trading at a large discount to their underlying value.
I'm optimistic about the future of the below two ASX dividend shares.
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Bailador Technology Investments Ltd (ASX: BTI)
Bailador is a company that invests in unlisted technology businesses. Software is an attractive industry to invest in because of the high margins that technology companies can generate on their intangible offerings. On top of that, software businesses can rapidly sell another (digital) subscription, they don't need to open another store or make another car or table.
Typically, Bailador invests in companies that are run by their founders and have proven business models with attractive unit economics, international revenue generation, and a "huge market opportunity."
Rosterfy is one of the most recent Bailador investments. This company provides volunteer and workforce management software to not-for-profit organisations, government volunteering bodies, and mass-scale sporting and other events.
Since Bailador's investment, Rosterfy has seen strong annual recurring revenue (ARR) growth, driven by a combination of new customer wins and account expansion from existing customers.
Rosterfy generates more than 50% of its ARR outside of Australia, with customers including FIFA, EUFA, Tennis Australia, Golf Australia, Lifeline Australia, British Heart Foundation, Greater London Authority, Brisbane City, Auckland Council and Las Vegas Convention and Visitors Authority.
The ASX dividend share pays a dividend yield equivalent to 4% of the pre-tax net tangible assets (NTA). The Bailador share price is trading at a 27% discount to its post-tax NTA and a 34% discount to the pre-tax NTA. The NTA is reported as the underlying value of Bailador's portfolio of investment stakes, cash, and so on.
Due to the huge NTA discount, Bailador may actually have a current cash yield of 6%, or 8.6% when grossed up for franking credits.
Rural Funds Group (ASX: RFF)
This ASX dividend share is one of my favourite real estate investment trusts (REITs) on the ASX. It owns a large portfolio of farmland across almonds, macadamias, vineyards, cattle and cropping.
The business is currently investing many millions of dollars into new macadamia plantings, which, when completed, can unlock more rental income.
High interest rates are a short-term obstacle to distribution and rental profit growth. But, the business aims to grow its distribution by 4% every year. Rural Funds has grown or maintained its distribution yearly since it started paying distributions in 2014. That's a pleasing level of stability.
Many Rural Funds' contracts have rental indexation linked to inflation or a fixed annual increase, plus the occasional market review. This can help offset the ASX dividend share's higher interest costs and help fund organic distribution growth in the future.
The current Rural Funds distribution yield works out to be 5.8%.
After its assets were recently independently valued, Rural Funds said in its FY24 half-year result that its adjusted net asset value (NAV) was $3.07. The Rural Funds share price closed on Friday at $2.03.
