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While ASX blue-chip shares are often favored for dividend income, there are promising opportunities in small-cap shares that can also serve as excellent sources of passive income. Here are two businesses, both with market capitalizations under $1 billion, that show potential for delivering substantial yields in FY25:
- Universal Store Holdings Ltd (ASX: UNI)
Universal Store Holdings, an ASX retail share, owns a portfolio of "premium youth fashion brands," including Universal Store, THRILLS, Worship, and the trial brand Perfect Stranger. With 95 physical stores across Australia, the company has expansion plans, intending to open new stores for various brands.
In FY24, the company anticipates opening additional Perfect Stranger and Universal Store locations. A growing store count positions Universal Store Holdings for potential earnings growth when retail conditions improve.
Commsec projections indicate an annual dividend per share of 25.9 cents for Universal Store Holdings in FY25, resulting in a grossed-up dividend yield of 11%. This attractive yield adds to the appeal of this ASX dividend share.
- Step One Clothing Ltd (ASX:STP)
Step One positions itself as a direct-to-consumer online retailer specializing in 'innerwear.' Despite the uncertainties in the retail sector in FY24, the company has prioritized profitability over revenue growth, leading to robust financial performance. Underlying EBITDA grew by 33.1% to $12 million, and underlying net profit after tax (NPAT) increased by 61.7% to $8.6 million.
Looking ahead to FY25, Step One plans to actively pursue "profitable growth," expanding its customer base, diversifying its product range, and investing in capabilities. The company aims to enhance customer experience, explore new markets, and expand sales channels.
In FY23, Step One paid an annual dividend per share of 5 cents. Projections on Commsec suggest that the dividend per share could rise to 5.9 cents in FY25, translating to a grossed-up dividend yield of 11.6%.
Both Step One Clothing and Universal Store Holdings present compelling opportunities for investors seeking substantial dividend yields in the upcoming fiscal year. It's important to note that these projections are subject to market conditions and business performance.
