2 retail ASX dividend shares with large yields

Accent and Adairs are both retail shares with large dividend yields.

There are some ASX dividend shares in the retail sector that may be interesting considerations for their large yields.

The strong market conditions for retailers may not be as strong in FY22 as FY21, but they are still expected to provide large cash payouts for shareholders.

These two businesses may have big dividend yields for the next 12 months:

shoes asx share price represented by white shoes against pink and blue background AX1 share price downgrade

Image source: Getty Images

Accent Group Ltd (ASX: AX1)

This business is one of the leading shoe retailers in the country. It sells footwear through a number of different brands in Australia and New Zealand (some are owned, some are exclusively distributed): Platypus, Hype, Stylerunner, Trybe, The Athlete's Foot, Glue store, Skechers, Vans, Dr Martens and so on.

Accent is always on the look for ways to increase its brand distribution. It recently bought the Glue Store retail business, and the wholesale and distribution brands, of Next Athleisure for $13 million. It came with annual sales of $90 million, including $16.6 million of online sales. This provides an opportunity to increase exposure in the youth apparel segment.

Accent is rolling out more stores across a number of its brands, whilst also investing in its digital presence.

Accent has grown rapidly in recent reporting periods. FY21 first half earnings before interest and tax (EBIT) grew by 47.3% to $81.8 million, whilst earnings per share (EPS) went up 56.9% to 9.76 cents. Digital sales soared 110% to $108.1 million, representing 22.3% of total sales.

The profit growth allowed the retail ASX dividend share's board to grow the interim dividend by 52.4% to 8 cents per share.

Commenting on its dividend and profit growth aspirations, the Accent CEO Daniel Agostinelli said:

With long-term objectives and incentives linked to driving at least 10% compound EPS growth, Accent continues to be defined by strong cash conversion and the consistently strong returns it delivers on shareholders' funds.

According to Commsec, Accent could pay a grossed-up dividend yield of 6.6% in FY22.

Adairs Ltd (ASX: ADH)

Adairs is another business that's growing quickly with a tendency to pay a high dividend.

The first half of FY21 saw Adairs' total sales rise 34.8% to $243 million, with online sales jumping 163.2% to $90.2 million (representing 37% of total sales).

Profit margin growth helped the bottom line rise even faster. The overall gross profit margin improved 545 basis points, underlying EBIT surged 166% to $60.2 million and statutory net profit went up 233.4% to $43.9 million. This helped EPS grow to 25.9 cents (up from 7.8 cents).

The Adairs board decided to pay an interim dividend of 13 cents per share.

Adairs is investing in a number of areas to improve its financial performance in future years such as opening bigger stores (which are more profitable) and seeking to increase Mocka's market share in Australia.

The new national distribution centre in Melbourne is another part of the plan. This will help stock flow, online order fulfilment, improve stock availability and save an annual $3.5 million of costs once fully operational.

According to Commsec, Adairs is projected to pay a grossed-up dividend yield of 8.5%.

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 recommended ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended ADAIRS FPO. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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