Any ASX All Ordinaries Index (ASX: XAO) share that offers a dividend yield of 10% or more probably sets off two reactions in most All Ords investors' heads. The first might be one of interest. After all, the prospect of getting $1 back in passive income for every $10 invested every year is an appealing one.
But the second is probably an alarm bell. Finding a sustainable dividend yield of 11% or greater on the ASX is something of a wild goose chase. And most of the time, if a share offers a yield of that magnitude, it is because the markets are assuming it is unsustainable.
Otherwise, this yield wouldn't stay at 11% for long – investors would flood into the shares, increasing the share price and reducing the dividend yield.
Yet this is the situation facing investors who have noticed the current Myer Group Holdings Ltd (ASX: MYR) share price.
Yesterday, this famous ASX retailing institution and department store operator closed at 58 cents a share. Myer has paid out two ordinary dividends over the past 12 months. The first was the final dividend from November last year, worth a fully-ranked 2.5 cents per share.
The second was the May interim dividend, worth a much-improved 4 cents per share. That annual total of 6.5 cents per share gives the Myer share price a trailing dividend yield of 11.11% right now.
It gets even better too. In addition to that May interim dividend of 4 cents per share, investors also received a special dividend of 4 cents per share as well. If that payment was included in Myers trailing dividend yield, we would get a rather stupendous figure of 17.59%.
So does all this make Myer a bargain buy for passive income on the ASX today?
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Is All Ords share Myer's 11% dividend yield too good to be true?
This is an interesting case. One of the reasons that Myer's dividend yield is so high is that the Myer share price itself has had a rather terrible year, as is evident below:
It was only back in March that Myer was going for $1.14 a share, a good 48% higher than where the shares are today. As we discussed earlier, a falling share price translates into a higher trailing dividend yield.
But if Myer pays out the same dividends over the next 2 months (not including that special dividend), then it would offer investors a forward yield of 11.11% today.
The only problem is that we have no idea what Myer will do over the coming year in terms of dividends. Its last interim dividend in May was funded by Myer's impressive half-year results for the first half of FY2023. Those saw Myer report a 24.2% surge in revenues and a 17.4% rise in profits.
Many other ASX retail shares, including Adairs Ltd (ASX: ADH) as well as Dusk Group Ltd (ASX: DSK), have recently posted sales updates that indicate a sharply weakening environment for consumer retail spending. That's probably why the Myer share price has had such a rough year.
So we won't know for sure what will happen to Myer's dividends over the coming 2 months. But if its next earnings report (or sales update) shows the company's revenue or profits going backwards, then it's probably bad news for the Myer dividend. Let's wait and see what happens.
