The share market is a great place to find ASX dividend shares that can pay large dividend yields.
Dividends are not guaranteed. However, over a number of years, we can tell that some companies have a stronger commitment to paying dividends to shareholders than others.
I think ASX retail shares can be an effective way to get dividends because they typically have a fairly low price/earnings (P/E) ratio and can have a fairly high dividend payout ratio. This can result in a very good dividend yield.
With that in mind, I'm going to write about two ASX dividend shares that are expected to pay very large dividends over the next two dividends.
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Adairs Ltd (ASX: ADH)
Adairs is a retailer of homewares and furniture through three different brands – Adairs, Mocka and Focus on Furniture.
Out of FY23 and FY24, the profit estimate for FY23 is lower, so I will use that projection from Commsec. Adairs shares are valued at just 8 times FY23's estimated earnings and could pay an annual dividend per share of 16.8 cents. This would translate into a grossed-up dividend yield of 11%.
But, if the forecasts on Commsec turn out to be correct, the Adairs earnings and dividend could both grow by around 10% in FY24, which would mean the FY24 grossed-up dividend yield from the ASX dividend share would be 12.5%.
Assuming the Australian economy doesn't go into a painful recession next financial year because of interest rates, Adairs could benefit from having more stores, upgrading a few locations to larger stores (which are more profitable), having more loyalty members and being more efficient with its recently-opened national distribution centre.
Nick Scali Limited (ASX: NCK)
Nick Scali is another furniture retailer with its Nick Scali and Plush-Think Sofas brands after recently acquiring it.
The business sold an elevated amount of furniture during the COVID-19 period, but it could keep paying good dividends over the next couple of years.
Commsec numbers suggest that Nick Scali could generate earnings per share (EPS) of 85.1 cents, which would put the ASX dividend share at under 12 times FY24's estimated earnings.
The grossed-up dividend yield in FY24 would be 7.9%, while the FY23 grossed-up dividend yield is projected to be 10.5%.
Nick Scali may be able to grow its earnings in FY25 and beyond to a few different factors including a store rollout in New Zealand, growth of the Plush network in Australia, a range expansion and growth of online sales. Online sales can be very profitable for Nick Scali.
