This ASX small-cap share could pay a dividend yield of 10% in FY24

Get revved up for dividends: this stock could send a lot of cash to shareholders.

| More on:
a close up of a motorcycle's front wheel and body on the open road with another motorcycle rider in the background cruising behind the leading driver.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • MotorCycle Holdings is an ASX small cap share that claims to be the market leader in Australia
  • It’s expected to pay a large grossed-up dividend yield of 10% in the next two financial years
  • Management is expecting earnings to be resilient thanks to acquisitions and cost reductions

MotorCycle Holdings Ltd (ASX: MTO) is an ASX small-cap share that could pay a very large dividend yield to investors over the next couple of years.

For readers who haven't heard of the business before, it describes itself as Australia's leading motorcycle dealership and accessories provider. It has more than 40 locations across Queensland, NSW, Victoria, and the ACT.

The company is involved with selling new motorcycles, used motorcycles, accessories and parts, insurance, and mechanical protection plans, as well as providing servicing and repairs.

Motorcycle Holdings represents a "diverse portfolio of brands, selling all of the top 10 selling motorcycle brands in Australia".

Dividend expectations

While forecasts can change, at the moment, the motorcycle company is projected to pay an annual dividend per share of 12 cents per share in FY24 and FY25, according to Commsec numbers.

At the current Motorcycle Holdings share price, this estimated dividend means the company could pay a grossed-up dividend yield of almost 10% over the next two financial years.

While that sounds like a big yield, it doesn't represent a large dividend payout ratio. In both FY24 and FY25, MotorCycle Holdings is projected to pay just under half of its earnings in FY24 and FY25 as a dividend.

Earnings could remain resilient

The ASX small-cap share has acknowledged there could be challenging macroeconomic conditions because of rising interest rates and cost of living pressures which could impact demand.

In light of that, it's focusing on cost control, including reducing store costs across the network, while "maximising cost of goods efficiencies". Despite that, the cost of doing business was expected to rise in the second half of FY23 because of inflation.

But there are some positives. The businesses of Forbes and Davies and Wide Bay Motorcycles will contribute their first full year of earnings in FY23. The acquisitions of Mojo Group and TeamMoto Townsville will provide increased contributions in the second half.

Management believes the company's growth strategy will help insulate it from any further deterioration of the economy. This strategy includes growing its geographic footprint and greater product diversification.

In FY24, MotorCycle Holdings shares are predicted to generate 26.1 cents of earnings per share (EPS) and 26.6 cents of EPS in FY25.

If it's successful at generating the FY24 profit figure — which it may not — it'd be priced at under 7x FY24's estimated earnings. That's an incredibly low price/earnings (p/e) ratio for a business that claims to be the market leader in Australia and continues to make bolt-on acquisitions.

Foolish takeaway

While this isn't exactly a well-known business, I think the ASX small-cap share could be a contender for a very strong dividend yield over the next two years, and its earnings may be undervalued by the market.

Should you invest $1,000 in Vulcan Energy Resources Limited right now?

Before you buy Vulcan Energy Resources Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Vulcan Energy Resources Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Man holding out Australian dollar notes, symbolising dividends.
Dividend Investing

3 ASX shares yielding over 7% for your portfolio

Analysts are expecting big yields from these buy-rated shares in the near term.

Read more »

Hand of a woman carrying a bag of money, representing the concept of saving money or earning dividends.
Dividend Investing

1 ASX dividend stock down 27% I'd buy right now

This business is trading cheaply, in my view.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
Dividend Investing

A 5% yield? Here's the dividend forecast for an ASX 200 powerhouse

Are the generous dividends growing or getting smaller? Let's find out.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Dividend Investing

This 10% ASX dividend stock is my top pick for immediate income

This business offers a lot of what income investors are looking for.

Read more »

A happy construction worker or miner holds a fistful of Australian dollar notes.
Dividend Investing

Buy Rio Tinto and these ASX dividend shares in May

Analysts expect good yields from these buy-rated shares.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Dividend Investing

Top broker forecasts this quality ASX 200 dividend share could surge 45%!

A leading broker forecasts outsized gains ahead for this high-yielding ASX 200 dividend stock.

Read more »

A couple sitting in their living room and checking their finances.
Dividend Investing

Beat falling interest rates with these growing ASX dividend shares

Analysts think these shares could be top picks for income investors now interest rates are falling.

Read more »

Gold bars and Australian dollar notes.
Dividend Investing

How these soaring ASX 200 stocks are shaping up to be the dividend gems of 2026

With revenue surging, these ASX 200 stocks may be supersizing their dividends in 2026.

Read more »