There are a number of ASX dividend shares with yields above 5%. Though not all of them are expecting long-term earnings growth.
Demand for income has been elevated as interest rates decline. What interest someone would get from $1 million cash in the bank is a fraction of what used to be on offer.
However, there are still some businesses out there looking to reward shareholders with cash payments which have higher yields.
Accent Group Ltd (ASX: AX1)
Accent is one of the largest shoe retailers across Australia and New Zealand. It has a number of its own brands as well as exclusive distribution rights for other global names. Examples include Skechers, Platypus, VANS, Hype, The Athlete’s Foot, Dr Martens, Stylerunner, Pivot, Glue Store and Trybe.
The ASX dividend share aims to have the best in class margins with gross profit margin growth initiatives as well as a drive for cost efficiency.
Management believe that the company has strong future growth initiatives through Stylerunner, Glue Store, digital sales and new stores, all this is aiming to lead to market share growth.
In FY21, the company opened 90 new stores and all of them were trading ahead of budget. Stylerunner had four stores at the time of the FY21 result (trading “well ahead of expectations”) with 15 new stores to open by early 2022.
Net profit grew by 38.6% to $76.9 million in the last financial year, allowing the board to grow the full year dividend by 21.6% to 11.25 cents per share.
Accent CEO Daniel Agostinelli said about the company’s profit growth and shareholder returns plans:
With our long-term objectives and incentives linked to driving at least 10% compound earnings per share (EPS) growth, Accent continues to be defined by retail innovation, strong cash conversion and the growing returns it delivers on shareholders’ funds.
According to CommSec, Accent could pay a grossed-up dividend yield of 7.3% in FY23.
Adairs Ltd (ASX: ADH)
Adairs is a retailer of homewares, furnishings and, increasingly, furniture.
The business has seen people invest in making their homes more comfortable. It is trying to offer its products to customers with both a store and digital offering. Adairs believes it’s important to be able to offer shoppers the ability to shop how they want to. Multi channel customers spend 40% to 110% more than single channel (store only or online only) customers.
Management believe that a key part of the ASX dividend share’s success is its business model. That includes “strong” brands that it owns and controls, which lowers costs of winning and keeping customers, being able to offer unique products, has higher margins and allows it to expand in other categories. The vertical supply chain is another benefit, providing greater control, the ability to be more agile to conditions and trends, and offer “significantly higher” profitability. Its large and loyal customer base is another area of strength.
Adairs pays out a reasonably high level of its profit as a dividend each year, but keeps some of the profit to re-invest into the business.
At the current Adairs share price, it has a FY23 grossed-up dividend yield of 10% according to Commsec.