2 high-yield ASX stocks I'd buy for dividends

I think these stocks are undervalued and offer a compelling yield.

| More on:
Man holding out $50 and $100 notes in his hands, symbolising ex dividend.

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

Investors searching for passive income could do very well with ASX dividend stocks that offer big dividend yields.

When a business is trading at a cheap level compared to its earnings, or at a large discount to the underlying net asset value (NAV), it can push up the potential yield.

I believe the market is underestimating how much cash flow the below two businesses can generate and pay to shareholders. That's why I'm calling them buys.

Centuria Office REIT (ASX: COF)

As the name suggests, this is a real estate investment trust (REIT) that owns office properties in Australia.

There is a lot of negative commentary about office buildings at the moment because of the COVID-19 effects of more people working from home, which seems to be a permanent shift.

According to Centuria, the worst areas of demand impact are the Melbourne and Sydney CBDs. However, areas seeing strong 'net absorption' of demand include the Melbourne fringe, Canberra, the Brisbane fringe, the Brisbane CBD, and Adelaide.

Centuria Office REIT says 92% of its portfolio is located outside of the Sydney and Melbourne CBD, so it's actually a lot better positioned than the market seems to give it credit for.

At 31 March 2024, the ASX dividend stock's portfolio occupancy was 94.3% and it had a "healthy" 4.4 year weighted average lease expiry (WALE). These are quite strong numbers in my opinion.

The business is expecting to pay a distribution per unit of 12 cents for FY24, which translates into a distribution yield of around 9.75%. I think that's a high yield for a REIT and, to me, suggests it may be trading cheaply for how much rental profit it's making.  

The Centuria Office REIT share price is down around 50% since September 2021, as seen on the chart below.

Created with Highcharts 11.4.3Centuria Office REIT PriceZoom1M3M6MYTD1Y5Y10YALL1 Sep 202118 May 2024Zoom ▾Sep '21Jan '22May '22Sep '22Jan '23May '23Sep '23Jan '24May '24Jan '22Jan '22Jul '22Jul '22Jan '23Jan '23Jul '23Jul '23Jan '24Jan '24www.fool.com.au

Accent Group Ltd (ASX: AX1)

Accent is a major shoe retailer in Australia. It is a local distributor for several global brands, including CAT, Dr Martens, Henleys, Herschel, Hoka, Kappa, Merrell, Skechers, Ugg, and Vans.

Pleasingly, the consumer stock is also growing its own portfolio of brands so it's not as reliant on those international names. Some of its own brands include Glue Store, Platypus, Stylerunner and The Athlete's Foot.

As the chart below shows, the Accent Group share price has dropped around 30% since April 2023, dramatically increasing the prospective dividend yield.

Created with Highcharts 11.4.3Accent Group PriceZoom1M3M6MYTD1Y5Y10YALL1 Apr 202318 May 2024Zoom ▾May '23Jul '23Sep '23Nov '23Jan '24Mar '24May '24May '23May '23Sep '23Sep '23Jan '24Jan '24May '24May '24www.fool.com.au

According to the estimates on CMC Markets, the ASX dividend stock is expected to pay an annual dividend per share of 11.5 cents in FY24 and 14.3 cents in FY26. This translates into forward grossed-up dividend yields of around 9% in FY24 and 11% in FY26.

It's understandable why the Accent share price has fallen – the retail environment is uncertain amid high inflation and elevated interest rates. But, I believe the decline has gone too far.

I'm optimistic about Accent's future because of an ongoing store rollout, long-term growth of digital sales, a growing portfolio of owned brands, and the potential for a recovery in household retail spending in the next couple of years.

Motley Fool contributor Tristan Harrison has positions in Accent Group. 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 Accent Group. 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

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

Analysts name the best ASX dividend stocks to buy this month

Let's see what they are saying about these income options.

Read more »

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

Buy these ASX dividend shares for 5% to 7% yields

Brokers think these shares could be top picks for passive income investors.

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Dividend Investing

Own ASX A200, NDQ, or ARMR ETFs? It's dividend payday for you!

Betashares will pay distributions to ASX ETF investors today.

Read more »

A young female ASX investor sits at her desk with her fists raised in excitement as she reads about rising ASX share prices on her laptop.
Dividend Investing

Why it's a great day for Vanguard ASX ETF investors!

It's dividend payday for investors in the VAS, VHY, VGS and other Vanguard ETFs today.

Read more »

Male hands holding Australian dollar banknotes, symbolising dividends.
Dividend Investing

This ASX 200 stock has suddenly become the highest-yielder on the index!

This stock currently has a yield of over 10%.

Read more »

Cheerful boyfriend showing mobile phone to girlfriend in dining room. They are spending leisure time together at home and planning their financial future.
Dividend Investing

2 of the best ASX dividend shares to buy for income

Let's see what analysts at Bell Potter are saying about these top income stocks.

Read more »

a woman looks at her phone while making a transaction at the counter of a store where racks of clothing can be seen in the background.
Dividend Investing

Is this hidden gem ASX share a buy for passive income with a 7% yield?

I think this small company offers big potential as a dividend stock.

Read more »

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

The ultimate passive income portfolio using ASX dividend stocks

Here are five stocks that analysts think could be buys for income investors.

Read more »