The two ASX dividend shares I'm about to share could deliver enormous annual passive income for investors. With just a $10,000 investment, they can potentially each make dividend returns of more than $1,000.
If the dividend yield is at least 10%, then shareholders could get returns that are close to the S&P/ASX 300 Index (ASX: XKO) total return from just the dividend income.
Of course, dividends are not guaranteed. And normally there's a reason that the dividend yield is so high. Typically, it's a combination of a low price/earnings (p/e) ratio and a fairly high dividend payout ratio.
With interest rates currently rising and inflation biting into household finances, some ASX retail shares have been sold down. This could give investors the opportunity to snare some solid companies at lower prices and elevated dividend yields.
Even if the dividend is lower than forecast, the yield could still be above 10%, so we can see that there is a margin of safety.
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Dusk Group Ltd (ASX: DSK)
Dusk is a retail company that specialises in exclusive home fragrance products designed in-house. It sells candles, ultrasonic diffusers, reed diffusers and essential oils, as well as fragrance-related homewares.
In the first 19 weeks of FY23, the ASX dividend share saw total sales growth of 23.9%, with stores now open after lockdowns. The business is opening new stores in Australia, expanding into New Zealand and benefiting from growth in its membership numbers.
Commsec forecasts that the annual dividend per share could potentially be 17 cents in FY23. At the current Dusk share price, that suggests the FY23 grossed-up dividend yield could be 13.5%.
With a $10,000 investment, that would generate $1,350 of annual passive income in year one.
Adairs Ltd (ASX: ADH)
Adairs is another ASX retail share. It sells homewares and furniture through its Adairs stores, Focus on Furniture stores and the Mocka brand.
The company has benefited from household demand for home improvement over the last few years.
That strong demand may not continue forever, but Adairs has seen growth in the first 16 weeks of FY23. Compared to locked-down COVID times at the start of FY22, total sales are up 45.5%, and sales excluding Focus were up 7.6%. This was thanks to consumer spending remaining "resilient".
Adairs expects to open four to six new Adairs stores in FY23 and two to three new Focus stores. The ASX dividend share forecasts FY23 earnings before interest and tax (EBIT) to be between $75 million and $85 million.
On Commsec, the projection is that Adairs could pay an annual dividend per share of 18 cents with a grossed-up dividend yield of 11%.
With a $10,000 investment, that translates to an annual passive income of $1,100 in year one.
