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Creating a passive source of income will be on many New Year’s resolution lists this year. Investors like you and me scour the market for dividend-paying investments to fill our pockets.
However, ASX’s modest small cap is often overlooked during this effort.
It is important to remember that the Australian market has more dividend opportunities than just the big four banks and a few mining giants. why is that important?…because, on average, small caps outperform large companies over the long term.
In my opinion, it’s the same as having your cake and eating it! After all, there’s no rule against paying dividends on investments. When growth.
ASX small caps to buy for passive income.
To get the best of both worlds, we’ve cut down to just two small-cap ASX stocks that deliver incredible returns. To make the list, these companies had to provide his $300 million to $2 billion market cap and a yield of over 4%.
HealthCo Healthcare and Wellness REIT (ASX: HCW)
This first one is a little different than other real estate investment trusts (REITs). HealthCo REIT was spun up by his HMC Capital team who successfully acquired and diverted the former Masters portfolio from Woolworths in 2017.
As the name suggests, the REIT focuses on developing and managing a high quality real estate portfolio for lease to various healthcare tenants. These tenants include Chemist Warehouse, Griffith University, G8 Education, and Uniting Care Queensland.
In addition, a high occupancy rate of 99% and a weighted average lease term (WALE) of 10.2 years are encouraging indicators of passive income certainty. This his ASX small cap currently has a dividend yield of 4.3%.
Smart Group Corporation (ASX: SIQ)
Here are the companies whose stocks have plummeted and hurt over the past year. As you can see below, the stock of the salary package and innovative leasing provider is down 31% compared to a year ago.
Relatively flat earnings and the loss of a contract with the Victorian Ministry of Education and Training have upset shareholders. Nevertheless, the company has a track record of delivering revenue and dividend growth.
With a price/earnings ratio (P/E) of 10.5, Smartgroup looks like a value opportunity for passive income and further upside. The trailing dividend yield is about 12.8%.
We expect this to drop in 2023, but we believe the dividend remains stable thanks to Smartgroup’s high margins (typically above 20%).