There are some cheap ASX shares that could be good options for income.
One of the advantages of having a low price/earnings ratio is that it means a reasonably high dividend payout ratio translates into a pretty hefty dividend.
The below two businesses have low price/earnings ratios, growth plans and high dividend yields:
Adairs Ltd (ASX: ADH)
Adairs is one of the leading retailers of homewares in Australia. It sells what are considered to be higher quality products.
Let’s look at the estimates on CommSec for the business in FY21. Those forecast numbers suggest Adairs is valued at 10 times this year’s estimated earnings with a potential fully franked dividend yield of 6.6%. Only time will tell how strong the FY22 result and dividend will be.
But the ASX share has solid plans for the medium-term. It has been working hard at increasing its profit margins, decreasing its cost of doing business as a percentage of sales and being more efficient.
Adairs has plans to grow and utilise its large and loyal customer base, continue growing online sales (which accounted for 37% of total sales in HY21), improve & enlarge its stores (with higher margins) and finish its new national distribution centre which will save $3.5 million per year.
Nick Scali Limited (ASX: NCK)
Nick Scali is one of the largest furniture retailers in Australia. Nick Scali sources its products from around the world and imports directly from some of the largest manufacturers globally.
The ASX share is expected to have an exceptionally strong FY21 – Nick Scali is valued at 12 times the estimated earnings for FY21 and then 16 times the estimated earnings for the 2022 financial year. The dividend is projected to be a fully franked yield of 6.6% in FY21 and 5% in FY22.
Nick Scali has a number of organic growth initiatives to grow the business. It’s going to expand its store network, launch adjacent categories and grow its digital offering.
Capital led growth opportunities include disciplined acquisitions as well as increasing the number of owned properties, rather than just leasing them. This leads to a lower cost of doing business as well as improved operating margins.
It had 61 stores as at 4 May 2021. Nick Scali has plans for at least 86 showrooms across Australia and New Zealand.
There are other ASX dividend shares that may also be worth considering for the long-term.
