There are some wonderful ASX growth shares that are delivering exceptional dividends to investors.
ASX growth shares may not be known for their dividends, but one of the great things about strong growth in earnings per share (EPS) is that it also enables good growth of the dividend as well.
While in the first few years a dividend yield of an ASX growth share isn't likely to be as high as BHP Group Ltd (ASX: BHP), it can rise over time to be bigger.
Below are two that are paying solid yields and also could deliver excellent growth over time.
Lovisa Holdings Ltd (ASX: LOV)
Lovisa is a leading ASX retail share that sells affordable jewellery which is focused on younger shoppers.
The business has a global network of stores in Australia, North America, Europe and so on. Asia could be the next growth engine for the company if it's able to achieve a good foothold in places like India or China.
Let's have a look at how much dividend income the ASX growth share is projected to pay in 2023.
Commsec numbers suggest that Lovisa could pay a grossed-up dividend yield of around 3%.
By FY25, the projections suggest that the EPS could jump by 55% and that the dividend could increase by 43%. These numbers suggest that Lovisa would be retaining a higher proportion of its earnings to fund its growth. In other words, the dividend payout ratio could decrease.
In FY25, the business could pay a grossed-up dividend yield of 4%. I think the dividend could grow a lot more over the rest of the decade.
FY23 is looking promising, with the company entering Canada, Poland, Hong Kong, Italy and Mexico. It's opening itself up to countries with large populations.
Universal Store Holdings Ltd (ASX: UNI)
Universal Store is not a well-known name on the ASX, but I think long-term growth of EPS and dividends could make the apparel ASX retail share stand out.
I like that the business has a fairly easy path to growth through opening new stores. It's important that the company chooses good locations that don't cost too much in rent, but its expansion strategy is going well.
At the company's annual general meeting (AGM), Universal Store revealed that total sales had grown 40% year over year, which didn't include the acquired THRILLS business numbers. It also said that the gross profit margin had improved year over year.
Commsec numbers suggest that the business is going to achieve EPS of 41 cents, putting the company at 14 times FY23's estimated earnings. EPS is predicted to grow by 30% to FY25.
This could allow the dividend to grow from 27.4 cents per share – a grossed-up dividend yield of around 7% – to 35.9 cents per share in FY25. That potential FY25 payout would be a grossed-up dividend yield of 9.1%.
