IPH Ltd (ASX: IPH) is arguably one of the most underrated ASX dividend stocks on the Australian share market right now.
It doesn't get anywhere near as much love as the likes of telco giant Telstra Group Ltd (ASX: TLS) or big four bank Commonwealth Bank of Australia (ASX: CBA). That's despite having a truly incredible track record.
For example, the intellectual property (IP) services company has lifted its dividend each year over the past decade. Even during the chaos of COVID-19.
And if analysts at Goldman Sachs are to be believed, this positive run will continue through to at least FY 2027.
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What is the broker saying about this ASX dividend stock?
According to a recent note, the broker is forecasting fully franked dividends per share of 36 cents in FY 2025, 39 cents in FY 2026, and then 41 cents in FY 2027.
Based on the current IPH share price of $5.43, this will mean generous dividend yields of 6.6%, 7.2%, and 7.6%, respectively.
But that's not all. As well as offering big yields, Goldman expects even bigger capital gains if buying at current levels.
The broker currently has a buy rating and $7.50 price target on the ASX dividend stock. If it were to rise to that level, it would mean a mouth-watering gain of 38% for investors.
This brings the total potential 12-month return to almost 45%.
Why is it bullish?
Goldman likes the ASX dividend stock due to its defensive earnings and growth potential. The latter is expected to be boosted by its expansion in the Asian market. It explains:
In our view, IPH is well-placed to deliver consistent and defensive earnings with modest overall organic growth. We expect Asia to be the fastest growing region for IPH, as the company leverages its strong market share in Singapore to grow in other Asian markets. We expect relatively stable earnings in the A/NZ business and see market share stabilising at c.30-35%. We expect the next factor to watch for will be further consolidation of the Canadian market and/or an acquisition in a new secondary market (e.g. South Africa, South America, or Eastern Europe).
The broker also highlights that IPH's shares trade on very low multiples (11.5x estimated FY 2025 earnings). It adds:
Trading on a material NTM P/E discount to its historical average multiple, and with defensive earnings, strong cash flow and M&A optionality, we believe risk-reward is skewed to the upside; hence, we are Buy rated.
