2 ASX dividend shares expected to pay mega income yields

These two ASX shares may be about to pay investors big dividends…

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Key points

  • Experts are tipping two particular ASX dividend shares to deliver large income payouts
  • Adairs is a retailer of furniture and homewares
  • Accent is a shoe retailer with many different brands

ASX dividend shares that are paying high-income yields to investors may be attractive in the current environment.

Interest rates are expected to go higher this year. But the dividend yields could still be much higher than bank interest rates.

According to analyst forecasts, some businesses are expected to pay particularly high dividend yields over the next year or two. Here are two:

Adairs Ltd (ASX: ADH)

Adairs describes itself as Australia’s largest specialty retailer of home furnishings and home decoration products. It operates three brands – Adairs, Mocka, and Focus on Furniture. Mocka is a home and living products designer and retailer.

It’s currently rated as a buy by the broker Morgans, with a price target of $3.50. That implies a potential rise of around 21% over the next year on its current share price of $2.88. The broker noted there continues to be good demand for its products.

Since the start of 2022, the Adairs share price has fallen by almost 30%. This has boosted the estimated future dividend yield from the ASX dividend share.

At the current Adairs share price, Morgans thinks Adairs could pay a grossed-up dividend yield of 9.4% in FY22 and 12.9% in FY23.

Adairs plans to open more stores, upsize some existing stores, grow its online sales and become more efficient. The company points to the growth of its overall floorspace and its membership as positives that can help sales.

Morgans thinks the Adairs share price is valued at 9x FY22’s estimated earnings and 7x FY23’s estimated earnings.

Accent Group Ltd (ASX: AX1)

Accent Group is one of the largest retailers of shoes in Australia. It has a mixture of its own brands and also acts as the distributor for many other global shoe brands.

Some of this ASX dividend share’s brands include The Athlete’s Foot, Dr Martens, Glue Store, Hoka, Hype, Kappa, Nude Lucy, Merrel, Platypus, Skechers, Stylerunner, and Reebok.

The company’s first half of FY22 was impacted by mandated store closures. But, after the wave of the Omicron variant, the company said that like for like sales in the four weeks between 24 January and 20 February “improved significantly” and were in line with last year.

It also continued to drive full price, full margin sales. Over the first eight weeks of the second half, the gross profit margin percentage was “in line with expectations and ahead of the prior year”.

The ASX dividend share is working on expanding its store network, growing its online sales, and adding more quality brands.

UBS currently rates it as a buy, with a price target of $2.50. That implies a potential rise of 59% on its current price of $1.57. The broker notes the high level of store openings that the company is undertaking.

On the broker’s numbers, the Accent share price is valued at 11x FY23’s estimated earnings, with a potential grossed-up dividend yield of 11.7% in FY23.

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. owns and has recommended ADAIRS FPO. The Motley Fool Australia owns 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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