For those seeking reliable income through dividends and potential long-term growth, ASX dividend shares present a compelling opportunity. Investing in companies that offer a good dividend yield while potentially providing capital appreciation can be an attractive strategy for income seekers. Below are three ASX dividend stocks that are currently considered strong options for generating passive income.
Collins Foods Ltd (ASX: CKF) Collins Foods, a prominent operator of KFC outlets across Australia, Germany, and the Netherlands, has demonstrated notable growth and potential. The company is expanding its presence by increasing the number of locations in both Australia and Europe, which is expected to drive further revenue and profit growth.
For the fiscal year 2024, Collins Foods reported a revenue increase of 10.4% to $1.49 billion, alongside a 15.6% rise in underlying net profit after tax (NPAT) to $60 million. The company also raised its full-year dividend by 3.7% to 28 cents per share, yielding a grossed-up dividend of 4.5%.
Looking ahead, Collins Foods is projected to continue its growth trajectory, with expectations that its profit and dividend could significantly increase by FY29. The forecasted dividend per share for FY29 is 60 cents, which translates to an estimated grossed-up yield of 9.6%. The company's current trading valuation is approximately 17 times the estimated earnings for FY25.
Centuria Industrial REIT (ASX: CIP) Centuria Industrial REIT stands out as a noteworthy real estate investment trust (REIT), holding a substantial portfolio of industrial properties across Australia. This portfolio includes logistics and distribution warehouses, which are highly sought after due to limited space in urban areas, the rise of e-commerce, and the onshoring of logistics operations.
During FY24, Centuria Industrial REIT benefited from strong leasing activity, which enabled it to project increased earnings for the third consecutive year. The company has been able to leverage market conditions to achieve exceptional re-leasing spreads, averaging 43% across 300,000 square meters of leasing space. With around 39% of its portfolio leases set to expire by FY28, Centuria Industrial REIT is well-positioned to capitalize on ongoing rental growth in Australia’s urban infill markets.
The REIT is expected to increase its distribution per unit to 16.3 cents, resulting in a forward distribution yield of 5.2%. It is currently trading at a 19% discount to its net tangible assets (NTA), which were valued at $3.87 as of 30 June 2024.
Metcash Ltd (ASX: MTS) Metcash is a major distributor of supermarket items and liquor to a range of independent retailers, including IGA, IGA Liquor, Cellarbrations, The Bottle-O, and Porters Liquor. Additionally, the company operates various hardware businesses, such as Mitre 10, Home Timber & Hardware, Total Tools, Alpine Truss, and Bianco Construction Supplies.
The company aims to maintain a dividend payout ratio of 70% of underlying NPAT. With ongoing population growth supporting revenue and earnings expansion, Metcash has shown promising performance. In the first seven weeks of FY25, total group sales increased by 2.2%.
For FY25, Metcash is forecasted to deliver a grossed-up dividend yield of 7.9%, with the company trading at approximately 13 times the estimated earnings for that fiscal year.
These ASX dividend stocks—Collins Foods Ltd, Centuria Industrial REIT, and Metcash Ltd—offer compelling opportunities for investors seeking passive income and growth. Each company provides a solid dividend yield and demonstrates potential for future capital appreciation, making them noteworthy considerations for those focused on income-generating investments.