ASX dividend shares with fairly high dividend yields can unlock a lot of passive income for investors.
By mixing a group of different businesses, we can achieve diversification and an excellent stream of cash flow.
But I wouldn't just go for any business, I'd aim for companies with an improving dividend record and plans for future operational growth.
With that in mind, these are some of the ASX dividend shares I'd call on to build good dividend annual income by investing $3,000 into each of them to make around $1,000 of dividends by FY25.
Universal Store Holdings Ltd (ASX: UNI)
The business says that it owns a portfolio of "premium youth fashion brands and omni-channel retail and wholesale businesses". The main brands are Universal Store and THRILLS, and it's currently trialling a Perfect Stranger brand as a standalone retail concept. It has over 90 stores.
It's benefiting from growing sales as well as improving underlying profit margins. Improving scale can help this business deliver much more earnings for investors. The company is hoping to have between 101 stores to 103 stores by 30 June 2023.
In FY25, the ASX dividend share is projected to pay an annual dividend per share of 35 cents, which would be a grossed-up dividend yield of 10.5%, according to the estimates on Commsec.
The business could be trading very cheaply based on the profit projection for FY25, with it valued at just 8 times FY25's estimated earnings.
A $3,000 investment would pay a total of $315 of annual dividend income in FY25.
Metcash Ltd (ASX: MTS)
Metcash is a diversified retailer and wholesaler. It supplies IGA supermarkets around Australia. The business also supplies liquor brands including IGA Liquor, Bottle-O, Cellarbrations, Thirsty Camel and Porters Liquor. It also owns a number of hardware brands including Mitre 10, Total Tools and Home Timber & Hardware.
The ASX dividend share has benefited from increased demand for local neighbourhood shopping. It has also seen strong earnings growth from its hardware division, which has benefited from the acquisition of Total Tools.
Australia's rising population and the company's growing benefits of scale can help maintain and grow the earnings and dividend.
In FY25, the ASX dividend share is projected to pay an annual dividend per share of 22.2 cents according to Commsec. This would be a grossed-up dividend yield of 8.2%.
Commsec estimates put the Metcash share price at 11 times FY25's estimated earnings.
A $3,000 investment would pay $246 of annual dividend income in FY25.
Adairs Ltd (ASX: ADH)
This ASX retail share sells homewares through Adairs, while its other businesses of Mocka and Focus on Furniture are best known as furniture retailers.
Its earnings can be cyclical as household demand for homewares and furniture isn't typically at a constant rate through the economic cycle. However, times of weakness can be an opportunistic time to invest.
Adairs is looking to grow its profit through store network expansion, upsizing some locations to larger stores (which are more profitable), range expansion and growing its loyalty member numbers.
In FY25, the ASX dividend share is projected to pay an annual dividend per share of 22 cents according to Commsec, which equates to a grossed-up dividend yield of 14.3%.
The Adairs share price is priced at just 6 times FY25's estimated earnings, which seems very cheap.
A $3,000 investment would pay $429 of annual dividend income in FY25.
Foolish takeaway
The three of these investments, totalling $9,000, could unlock $990 of annual dividend income. I think all of them have very promising futures, combined with strong projected dividends in the coming years.
