11% dividend yield! Is this the greatest ASX 300 bargain?

The tax benefits offered via franking credits can offer investors a significantly higher grossed up dividend yield.

Investors looking for a high-yielding S&P/ASX 300 Index (ASX: XKO) dividend share may want to investigate Adairs Ltd (ASX: ADH).

The leading home furnishings specialist retail stock has three store brands – Adairs, Mocka and Focus on Furniture.

As you can see in the chart below, the Adairs share price has been a strong performer so far in 2023, up 8.2% since the closing bell on 30 December.

At the current share price of $2.38, the ASX 300 company has a market cap of $405 million and pays a trailing, fully franked dividend yield of 7.6%.

With the tax benefits offered via the franking credits, that could work out to a grossed-up dividend yield of 11%, depending on an investor's other income and tax obligations.

Woman looks amazed and shocked as she looks at her laptop.

Image source: Getty Images

Is this the greatest ASX 300 dividend share bargain?

Adairs isn't the only quality ASX 300 share with high-yielding dividends.

But I believe it's well worth considering for investors seeking potential share price growth and a historically reliable passive income stream.

Since listing on the ASX in June 2015, the retailer has made two annual dividend payments every year.

The company has a strong record of value creation, with experienced management and a growing e-commerce footprint. One which served it well during the pandemic lockdowns.

In the current financial year, the company announced at its annual general meeting (held in late 2022) that sales during the first four months of the 2023 financial year had increased 7.6% year on year.

And the growth outlook looks solid.

The ASX 300 dividend share plans to open two or three new Focus stores and four to six new Adairs stores in FY23.

What are the risks?

Of course, no investment is without risk.

One of the biggest potential tailwinds could come if inflation remains above expectations and the RBA is forced to continue increasing interest rates aggressively.

That could see consumers cut back on discretionary spending, including home furnishings. That, in turn, could see the ASX 300 dividend share book smaller profits and reduce its dividend payouts.

Indeed, at the end of January, Goldman Sachs downgraded Adairs from a buy to a neutral rating.

Still, the broker's analysts have a positive outlook for the business, saying, "We view the core ADH business as well-placed to deliver solid medium-term growth and should prove resilient given a highly loyal customer base."

And despite the neutral rating, Goldman has a target price of $3.15 for Adairs' shares. That's a whopping 32% above the current price.

Which makes Adairs a potentially great ASX 300 dividend share bargain.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Male hands holding Australian dollar banknotes, symbolising dividends.
Dividend Investing

How many BHP shares do I need to buy for $10,000 of passive income?

The mining giant is one of the Australian share market's biggest dividend payers.

Read more »

Man with his hands out as if pondering his options.
Exchange-Traded Funds (ETFs)

Do you own this ASX dividend ETF? Fundie explains why 'we aren't fans'

This ASX ETF aims to maximise income using covered call options.

Read more »

Australian dollar notes in a nest, symbolising a nest egg.
Dividend Investing

2 ASX dividend shares with yields above 7%

These businesses are providing significant passive income.

Read more »

A man closely watches a clock.
Dividend Investing

17 ASX shares going ex-dividend next week

Washington H. Soul Pattinson, Perenti, Civmec, and other ASX shares are set to go ex-dividend.

Read more »

A businessman's hands surround a circular graphic with a United States flag and dollar signs.
Dividend Investing

IVV ETF and other iShares funds are paying dividends today. Here's how much

Aussie investors love the IVV ETF, which tracks the US benchmark S&P 500 Index.

Read more »

Elderly woman typing on a laptop.
Dividend Investing

Wesfarmers vs Coles: Which dividend share is better for retirees?

Wesfarmers and Coles are ASX dividend titans for retirees, but I think one shades the other right now.

Read more »

House models with REIT written on one.
Dividend Investing

3 ASX real estate investment trusts paying a dividend yield of more than 7%

If you're after income, these shares could be worth a look.

Read more »

Small kid giving a thumbs up.
Dividend Investing

$4,000 buys 3,065 shares in an impressively reliable ASX dividend stock

This investment is paying incredibly impressive dividends.

Read more »