I believe there are some exciting ASX dividend shares that are valued at good prices for long-term growth and income.
Getting paid cash for owning shares is a really nice perk. You don’t have to do any work. The cash just rolls in every six (or three) months.
But I don’t believe that every business that pays a dividend is worth buying. However, I do really like the look of these two:
WCM Global Growth Ltd (ASX: WQG)
This is one listed investment company (LIC) that I think every income investor should consider.
I have written before about the investment manager’s interesting focus on culture that can really drive returns for a business.
To be considered for inclusion into WCM’s portfolio, there are two key criteria.
The first is that it must have a rising competitive advantage (or expanding economic moat). The second is a corporate culture that supports the expansion of the moat. WCM believes the direction of a company’s economic moat is of more importance than its absolute width or size.
Some of the current largest holdings include Stryker, Shopify, West Pharmaceutical Services, LVMH, Sherwin-Williams, MercadoLibre and Visa.
The net returns have been solid – over the last three years the ASX dividend share’s portfolio (after fees) has produced an average of 24.7% per year.
To me, the value looks compelling. It has an underlying value (net tangible assets – NTA) of around $1.90, but the share price is just $1.62.
In terms of the dividend, the LIC just announced a FY21 final dividend of 2.5 cents per share. The final FY22 dividend is expected to increase to 3 cents per share. An annualised 6 cents per share would equate to a potential fully franked dividend yield of 3.7%.
Adairs Ltd (ASX: ADH)
The home furnishings business Adairs just reported a very strong FY21 after all of the effects of COVID-19 with rampant retail demand and spending on improving homes.
Adairs revealed sales growth of 28.5% to $500 million. Group online sales were $187 million, representing 37.4% of total sales.
The underlying Adairs gross profit margin increased by 520 basis points to 66.7%. Underlying group EBIT (EBIT explained) jumped 97.3% to $109.1 million. Group statutory net profit soared 80.7% to $63.7 million. The earnings per share (EPS) increased 79% to 37.7 cents.
All of that growth from the ASX dividend share funded a final dividend of 10 cents per share, taking the annual FY21 dividend to 23 cents per share.
The FY21 dividend translates to a FY21 fully franked yield of 6.1%.
Whilst FY22 has gotten off to a rocky start due to lockdowns, particularly in Sydney, Adairs looks as though it has a good long-term future. It’s growing online sales quickly, it has plans to keep upsizing stores to make them more profitable, and supply chain improvements are saving costs and making it more efficient.
Over the coming years, after FY22, I think that Adairs can grow its profit and also the dividend nicely.