ASX dividend shares could be an interesting place to look for income. Yields on bonds are increasing as interest rates rise. But, dividend yields on ASX dividend shares are also going up.
As share prices go down, it pushes the prospective dividend yield up as well as making the actual valuation more attractive.
Looking at an example of bond yields, the exchange-traded fund (ETF) Vanguard Australian Government Bond Index ETF (ASX: VGB), Vanguard says that the running yield here is 2.89% and the yield to maturity is 3.66%.
I'm going to list a few ASX dividend shares that could provide better income than bonds for investors wanting to invest $5,000.
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APA Group (ASX: APA)
This business owns a national gas pipeline, it transports around half of the country's natural gas usage. It also has various energy generation (gas and renewable) and storage assets.
The yield has been pushed up by APA shares falling by around 20% since early August. It's expecting to pay a distribution of 55 cents per security, which would be a 3.8% increase compared to FY22. The FY23 distribution yield is expected to be 5.75%.
APA Group has recently committed to reducing its emissions by 30% in gas transmission, reducing emissions intensity by 35% in power generation, and implementing an active program to reduce emissions it can control in electricity transmission.
The business has one of the longest-running consecutive annual dividend increases in the S&P/ASX 200 Index (ASX: XJO).
Collins Foods Ltd (ASX: CKF)
Collins Foods is a major franchisee of KFC outlets across Australia and Europe. It also has a growing Taco Bell network in Australia.
The business has continued to grow its revenue and profit. FY22 revenue increased 11.1% to $1.18 billion, while underlying net profit after tax (NPAT) from continuing operations improved by 25% to $59.7 million.
The ASX dividend share saw its dividend rise by 17.4% to 27 cents per share. At the current Collins Foods share price, it has a trailing grossed-up dividend yield of 4.4%.
It continued to see sales growth in the first seven weeks of FY23, particularly in Europe. KFC Netherlands has seen same-store sales growth of 12.2% and KFC Germany with 19.4% sales growth. It's planning to open nine to 12 KFC Australia restaurants, two to five KFC Europe restaurants and nine to 12 Taco Bell restaurants. It wants Taco Bell to reach scale within three years.
The broker Morgans, which rates Collins Foods as an add with a price target of $11.50, thinks that Collins Foods will pay a grossed-up dividend yield of 4.6%.
Accent Group Ltd (ASX: AX1)
Accent is an ASX retail share that sells a variety of shoe brands, both owned brands and ones it acts as a distributor for. Examples of the brands include CAT, Dr Martens, Glue Store, Henleys, Hoka, Hype, Kappa, Nude Lucy, Sneaker Lab, Stylerunner, The Athlete's Foot and Vans.
While it suffered from store closures due to COVID restrictions in FY22, it can benefit from a full year of 'normal' trading days in FY23. That may explain some of the 48.9% sales growth that it saw in the first seven weeks of FY23. Its gross profit margin was also "well ahead" of FY22. The business is also hoping to open 50 stores in FY23.
Morgans rates this one as an add as well, with a price target of $2. It thinks the business could pay a grossed-up dividend yield of 10%.
