ASX dividend shares can provide excellent investment income for people chasing a high yield. That said, I've got a list of four names that could provide an average dividend yield of around 10% over the next five years.
Certainly, franking credits can provide a useful boost to yield for Australian tax residents.
When businesses have a relatively low dividend payout ratio and a relatively low price/earnings (p/e) ratio, it can lead to a strong dividend yield.
I'm thinking that year one of my five-year income goal will start with FY24, seeing as FY23 has already finished for some of the businesses. With $20,000 allocated between them, I think we can receive $10,000 of grossed-up dividend income over the next five years, and hopefully some capital growth too.
Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop has grown its dividend each year since it started paying one in 2017. The business has an "intention to continue to increase the dividend provided it delivers the best returns for shareholders". Its dividend policy is to pay approximately 60% to 80% of cash net profit after tax (NPAT).
The ASX share is a specialty retailer of male and female personal grooming products – it wants to be the market leader in all things related to hair removal. The business also sells some items in the oral care, hair care, massage, air treatment, and beauty categories. It has more than 120 stores across Australia and New Zealand.
I think demand for hair removal products can remain resilient in the face of economic challenges. Commsec estimates currently suggest the company can make earnings per share (EPS) of 13.7 cents in FY25 and pay an annual dividend per share of 11.1 cents. This represents a grossed-up dividend yield of 14.6%.
GQG Partners Inc (ASX: GQG)
GQG is one of the largest fund managers on the ASX and its funds under management (FUM) continues to grow. In its recent FY23 half-year result, we saw average funds under management (FUM) rise 4.7% to US$95.2 billion, with closing FUM of US$104.1 billion.
A vast majority of its revenue is linked to FUM, rather than performance, so growth of FUM is very helpful for earnings. The ASX share aims to pay out 90% of its distributable earnings each quarter. In HY23, distributable earnings grew 2.5% and the total dividend paid grew by 6.6% to US 3.87 cents.
Ongoing FUM inflows and investment performance can both push FUM and earnings higher.
In FY25, the business is projected to pay an annual dividend per share of AU 16.4 cents, according to Commsec. This would be a dividend yield of 10.75%.
Universal Store Holdings Ltd (ASX: UNI)
Universal Store is an ASX retailer focused on premium youth fashion apparel brands aimed at shoppers aged between 16 to 35. Its earnings predominately come from its Universal Store network, but it also has the THRILLS and Worship brands. It's also trialling the Perfect Stranger brand as a standalone retail concept.
The Universal Store share price fall of more than 50% since November 2021 has boosted its future dividend yield significantly. Same-store sales may take a hit in the short term, but if the ASX share continues opening new stores then this can support sales. The company is also looking to "drive productivity" in-store and online, and also optimise cost efficiencies at its new distribution centre.
According to Commsec, earnings could bounce back in FY25, enabling it to pay a grossed-up dividend yield of 10.5%.
Metcash Ltd (ASX: MTS)
Metcash is the business that supplies IGA supermarkets around Australia. As well, it supplies independent liquor retailers like Cellarbrations, The Bottle-O, IGA Liquor, Thirsty Camel, Duncans, and Porters Liquor. It also has the hardware brands Mitre 10, Home Timber & Hardware, and Total Tools.
To me, this ASX share has a portfolio of defensive businesses which can be resilient in the short term and benefit from Australia's growing population in the long term.
The business is committed to a dividend payout ratio of 70% of underlying net profit after tax.
Commsec numbers suggest the business could pay a grossed-up dividend yield of 8.5% in FY25.
Foolish takeaway
The average dividend yield of these four ASX shares for FY25 is just over 11%. If they maintained their payments for FY26, FY27, and FY28 then we'd easily reach the $10,000 dividend goal, even if there were no more dividend increases after FY25.
