ASX dividend stocks with large payouts could be appealing during this time of high interest rates. Investments typically need a sizeable dividend yield to be more appealing than a term deposit.
High interest rates are currently acting as a headwind for businesses that are significantly impacted by the current environment.
Real estate investment trusts (REITs) typically have a relatively high level of gearing on their balance sheets, while discretionary ASX retail shares may see less demand amid tighter household budgets. It's in those two sectors that I'm going to pick out two ASX dividend stock opportunities.
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Universal Store Holdings Ltd (ASX: UNI)
Universal Store describes itself as a premium youth fashion apparel business that sells under several brands: Universal Store, CTC (which owns the THRILLS and Worship brands), and Perfect Stranger.
This business may not sound like a quality passive income business, but it has impressed me. Universal Store has grown its annual ordinary dividend every year since 2021, when it started paying out profit to shareholders.
One of the most important factors for dividend growth is profit growth. Universal Store recently gave an update that revealed group sales in FY24 are expected to be up 9.7% year over year to $288.5 million. In the second half of FY24, the Universal Store segment saw like for like (LFL) sales growth of 6.6%, while Perfect Stranger LFL sales growth was 11.5% in the second half.
The ASX dividend stock is expecting to report underlying earnings before interest and tax (EBIT) of at least $46 million, which would be growth of approximately 14%.
In the first two weeks of FY25, total sales were up 15% year over year, excluding the CTC wholesale channel.
I believe the solid sales performance we're seeing can help dividend growth in the next couple of years to the end of FY26.
According to the projection on Commsec, the Universal Store's grossed-up dividend yield could be 8% in FY26.
Charter Hall Long WALE REIT (ASX: CLW)
This is one of the larger REITs, which owns a diversified portfolio of properties across a range of areas, including pubs and bottle shops, office buildings, telecommunications, service stations, distribution centres, food manufacturing, waste and recycling, and many others.
The ASX dividend stock, which recently reported in its FY24 result, has several positive attributes. Its occupancy rate was 99.9%, and 99% of the portfolio is leased to 'blue-chip' tenants.
As the name suggests, it has a long weighted average lease expiry (WALE) of 10.5 years, which gives investors income visibility and security.
During FY24, the business achieved $762 million in completed sales, representing around 11% of the portfolio. These divestments have reduced near-term lease expiry risk, and the proceeds have been used to repay debt and reduce gearing.
It has initiated a security buyback of up to $50 million, which helps improve the underlying value of the remaining Charter Hall Long WALE REIT securities.
The business normally pays out 100% of its rental profit as a distribution, leading to a pleasing distribution yield.
According to Commsec, the ASX dividend stock is projected to pay a distribution yield of 6.7% in FY26.
