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Headlines:
- High Dividend Yields: Accent Group Ltd (ASX:AX1) is expected to offer substantial dividend returns, with estimates indicating a fully franked yield of 7.2% for FY25 and a grossed-up yield of up to 12.8% by FY28.
- Strong Retail Performance: The company, which operates multiple shoe brands and global distributors, has shown improved trading results and is benefiting from increased store rollouts and strong sales across several brands.
- Positive Growth Outlook: UBS projects a rise in EBIT margins from 7.8% in FY24 to 10.1% by FY26, supported by a robust performance in the footwear sector and anticipated growth in earnings.
High Dividend Yields Ahead: Why Accent Group Ltd (ASX:AX1) Could Be a Top Passive Income Play
Some ASX stocks offer remarkably high dividend yields, and Accent Group Ltd (ASX:AX1) is poised to be a standout example. Here’s a closer look at why holding shares in this retailer could yield substantial passive income in the coming years.
A Diverse Retail Presence
Accent Group Ltd is a prominent player in the retail sector, specializing in a broad array of shoe brands. The company owns several retail brands, including Platypus, The Athlete's Foot, Glue Store, Hype, Lulu and Rose, and Stylerunner. It also acts as a distributor for global brands like Skechers, Ugg, Kappa, Hoka, Herschel, Henleys, Sebago, Merrell, and Vans.
Attractive Dividend Prospects
Accent's stock is noted for its low price/earnings (P/E) ratio, a trait common among many ASX retail shares. Typically, a lower earnings multiple can lead to higher dividend yields. Coupled with a generous dividend payout ratio, Accent offers an appealing dividend opportunity.
According to UBS estimates, shareholders of Accent could receive an annual payout of 16 cents per share in FY25. At the current share price, this translates to a fully franked dividend yield of 7.2% and a grossed-up yield of 10.2%. For those seeking long-term stability and growth in dividends, UBS projects further increases: 18 cents per share in FY26, 19 cents per share in FY27, and 20 cents per share in FY28. This would result in a grossed-up yield of 12.8% by FY28.
Positive Trends and Growth Outlook
UBS notes that the footwear sector is performing more robustly than the broader apparel market. Accent has shown improved trading performance, particularly in the second half of FY24, with like-for-like sales increasing by 4.1% compared to the previous year. For the full year, total like-for-like sales were up 1.7%.
The company expects to report earnings before interest and tax (EBIT) in the range of $109 million to $111 million. Notably, Accent is benefiting from an expanded store rollout and strong performance across several brands, including Skechers, The Athlete’s Foot, Hype DC, Stylerunner, Nude Lucy, and Hoka.
UBS anticipates that the EBIT margin could rise from 7.8% in FY24 to 9.5% in FY25 and 10.1% in FY26, reflecting a positive trend in profitability.
A Rebound Opportunity
With the potential for significant dividend yields and an improving operational outlook, Accent Group Ltd could be an attractive option for investors seeking passive income. As household finances and confidence potentially recover from current economic pressures, Accent may offer a compelling rebound opportunity.
