Invest $8,000 in this ASX dividend stock for $880 in passive income

I think this stock can provide attractive levels of dividends.

| More on:
Happy man in a holiday shirt holding out Australian dollar notes, symbolising dividends.

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

sdf

The ASX dividend stock Shaver Shop Group Ltd (ASX: SSG) could be a contender to pay the biggest passive income yield over the next 12 months.

If I wanted to receive as much dividend income as I could, Shaver Shop would be right at the top of my idea list.

An ASX retail share may not sound like an obvious candidate for a high-yielding, fairly dependable business. However, the last several years have shown that the business is capable of being a resilient dividend payer for income-focused investors.

$880 of passive income

In both the 2024 and 2023 financial years, Shaver Shop paid an annual dividend per share of 10.2 cents. At the current share price, that translates into a grossed-up (including franking credits) dividend yield of 11%.

That means if an investor put $8,000 into this ASX dividend share today and Shaver Shop paid a dividend of 10.2 cents per share again in FY25, they would receive grossed-up passive income of approximately $880 in year one.

Shaver Shop grew its annual dividend every year between FY17 and FY23 and then maintained it in FY24. The company has shown a desire to provide investors with a large, stable (and rising) dividend.

Low valuation

Investors may be wondering how Shaver Shop is able to provide such a large dividend yield.

A key part of the equation is that the ASX dividend stock is trading at such a low valuation. The lower the price-earnings (P/E) ratio, the higher the dividend yield.

Shaver Shop generated 11.7 cents of earnings per share (EPS) in FY24, which means it's currently trading at less than 12x FY24's earnings. The board of the ASX dividend share decided on a dividend payout ratio of 87% for the 2024 financial year.

Potential to grow earnings in the future

Despite the difficulties of the current economic situation in Australia and New Zealand, I believe the company can continue paying a good dividend in FY25 and beyond.

For starters, in its recent annual general meeting (AGM) update, the business reported that its gross profit dollars generated were flat in the first four months of FY25, thanks to a stronger gross profit margin offsetting slightly lower sales.

The company says it's operating in an attractive and growing market, particularly with male grooming.

In FY25, it's looking to drive category and range expansion with new brands. For example, Silk'n and Epilady were expected to launch in November 2024.

I also like that the ASX dividend share is looking to optimise its store network to improve profit by relocating within centres, refitting to the latest brand standards, and selectively opening new stores.

I believe Shaver Shop can continue to grow its profit in the longer term, which will help fund more dividend growth.

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 recommended Shaver Shop Group. 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 smiling at a laptop because of a rising share price.
Dividend Investing

Why this little-known ASX dividend share is a top pick for this fund manager

There are multiple reasons why this fund manager is bullish on this stock.

Read more »

A young woman drinking coffee in a cafe smiles as she checks her phone.
Dividend Investing

3 blue chip ASX 200 dividend stocks to buy now

Analysts think these blue chips would be top picks for income investors.

Read more »

Two laughing young women hold shopping bags and ride an escalator up to another level in a Scentre Group shopping centre.
Dividend Investing

Why I think these 2 ASX dividend stocks are ideal for income investors

These two businesses offer a lot of potential for income.

Read more »

A woman in a bright yellow jumper looks happily at her yellow piggy bank.
Dividend Investing

Forget CBA and buy these ASX dividend shares

Analysts think these shares could be better picks than the banking giant.

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Dividend Investing

3 ASX dividend shares to buy for a passive income portfolio

Analysts think these shares could be top picks for income investors.

Read more »

A happy male investor turns around on his chair to look at a friend while a laptop runs on his desk showing share price movements
Dividend Investing

Brokers name the ASX dividend shares to buy now

Let's see what they are saying about these income options.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Dividend Investing

This 5% monthly dividend stock is a cash flow machine

If you want monthly passive income, check out this stock.

Read more »

A woman presenting company news to investors looks back at the camera and smiles.
Dividend Investing

Broker names the best ASX dividend shares to buy now

Let's see why the broker is feeling bullish about these income options.

Read more »