The ASX dividend stock Lovisa Holdings Ltd (ASX: LOV) has suffered a 34% decline from its peak in August 2024, as the chart shows.
The last few weeks have been a rough period for ASX shares. Investors have become fearful over what could happen to the global share market amid the tariff trade war that's developing between the US and various countries.
Lovisa shares, among other ASX growth shares, have been sold off more heavily than the S&P/ASX 200 Index (ASX: XJO). But, the heavier decline could make it a more appealing opportunity, in my opinion.
One of the most appealing benefits of a lower share price is that it boosts the dividend yield on offer. For example, if an ASX dividend stock has a 3% dividend yield and the share price falls 10%, the dividend yield becomes 3.3%. As I noted, the Lovisa share price has dropped 34%.
Let's have a look at how appealing Lovisa is as an ASX dividend stock.
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Dividend yield
If we look at the last two dividends declared by Lovisa, they come to a total of 87 cents. That includes the recent FY25 half-year interim dividend, which was 50 cents per share, the same as the prior corresponding period.
Its trailing dividend yield is 3.5%, excluding franking credits.
However, the business could deliver dividend growth in the coming years. According to the broker UBS, the dividend payout could grow to 92 cents per share in FY26 and $1.05 in FY27. That translates into forward dividend yields of 3.7% and 4.25%, respectively.
If the business were to attach franking credits to future dividends, the grossed-up dividend yield would become more appealing.
Is this a good time to invest in Lovisa shares?
The business has seen its share price go backwards significantly, and now the price/earnings (P/E) ratio is more attractive. Based on UBS' forecasts, the Lovisa share price is valued at 26x FY26's estimated earnings.
A key part of the ASX dividend stock's growth plans is international store growth. In the FY25 first-half period, it opened 57 net new stores, ending with 943 stores. It's in numerous countries including Australia, the US, Canada, the UK, Germany, Italy, Poland, France and many more. Having so many markets is helpful because it can decide to open more stores in whichever market it thinks is the best for growing profit.
Operating leverage can help the business grow underlying profit faster than revenue in the coming years. In HY25, revenue rose by 8.8% to $405.9 million and net profit before tax (NPBT) grew by 10.8% to $80.6 million.
For interested investors, I think this is the right time to look at this ASX dividend stock.
