The potential for share price growth in tandem with generous dividends is a rare proposition to find in the share market. Yet, one broker believes that is exactly what the Accent Group Ltd (ASX: AX1) share price could be for investors.
Despite earnings slipping in the second half of last year, the team at Bell Potter believes the ASX-listed footwear retailer has a leg up on the competition. While Accent has returned 163% (including dividends) over the past five years, there could be more still on the table.
Let's take a closer look at the case being made by the Australian broker.
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Big opportunity for the Accent share price?
To set the scene, we have shares in Australia's eleventh-largest listed retail company down 52% from a year ago. Concurrently, Accent has managed to grow its total revenue by 23% for the trailing 12-month period — surpassing $1 billion in revenue for the first time in its history.
The disposal of aged inventory, as a result of COVID-19 lockdowns, took a toll on the company's bottom line in the first half of FY22. Specifically, net profit after tax (NPAT) tumbled 72% to $14.76 million for the six-month timeframe.
However, analysts at Bell Potter have not been repelled by the recent results. Instead, the team sees the current Accent share price as buying opportunity.
Importantly, the footwear company has been building upon the fundamentals of the business. In the first half, Accent opened 104 new stores. The company also recorded digital growth of 47.9% and signed a 10-year distribution agreement with Reebok.
Additionally, Bell Potter's confidence is boosted by Accent's ~30% market share in the Australian footwear market. That industry segment is currently worth $3 billion. The analysts also think the Aussie company can make reasonable headway in the $5 billion apparel market.
For these reasons, the broker is tipping a $2.20 price target on Accent shares, suggesting a 65% upside from here. Sweetening the company's potential is an estimated 5.8 cents per share in fully franked dividends in FY2022, projected to increase to 10.7 cents per share in FY2023.
The Accent share price is currently trading at $1.33, representing a dividend yield of 6%.
