Could this hidden dividend grower provide monster returns for your ASX share portfolio?

This ASX dividend share has never given its dividend a trim.

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shaver shop profit results share price rise represented by hands holding up various shaving device products against pink background

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ASX dividend share Shaver Shop Group Ltd (ASX: SSG) has been on an impressive dividend growth streak and it could keep going.

As the name of the company might suggest, it's a specialty retailer of male and female personal grooming products. It has a goal of being the market leader in "all things related to hair removal".

There are over 120 Shaver Shop stores across Australia and New Zealand that sell things like electric shavers, clippers, trimmers and wet shave items. The business also sells products in complementary categories such as oral care, hair care, massage, air treatment and beauty categories.

Dividend record

The business recently announced its FY23 result which showed a 2% annual increase in the dividend per share to 10.2 cents.

Shaver Shop has increased its dividend every year since 2017 when it first started paying one. That's including through the challenging retail years of FY19 (when house prices were falling) and FY20 (which included the start of COVID-19).

The ASX dividend share generated earnings per share (EPS) of 13.1 cents in FY23, meaning that the dividend payout ratio was only 78%.

In the FY23 half-year result presentation, the business said that its intention was to "continue to increase the dividend provided it delivers the best returns for shareholders".

But, it's worth stating that dividend payments and dividend growth are not guaranteed.

What is the Shaver Shop dividend yield?  

If we just look at the FY23 dividend payment of 10.2 cents per share, that equates to a grossed-up dividend yield of 12.5%. The next 12 months of dividends for FY24 may not be the same as FY23.

Estimates on Commsec currently suggest that the FY24 dividend payment could be 10.7 cents per share and in FY25 it could be 11.1 cents per share.

This means the FY24 grossed-up dividend yield could be 13.2% and the FY25 grossed-up dividend yield could be 13.7%.

How likely is profit growth for Shaver Shop shares?

The ASX dividend share's FY24 could be challenged because of the economic environment. In the first few weeks of FY24, the company said that its total sales were down 5.1% on FY23, but up 27% on FY20.

The company said that it's maintaining attention and discipline on the gross profit margin management and maximising gross profit dollars.

Shaver Shop says that personal care and beauty "remains a priority for many consumers" and it offers budget-conscious DIY alternatives to going to the barber or beauty salon.

The company's balance sheet also remains in a strong position – at the end of FY23 it had net cash of $13.5 million with no debt.

Management believes there's significant potential for the business to grow its market share. Interestingly, around 57% of its gross profit was derived from products exclusively sold at Shaver Shop. It currently has 122 stores and its target is to have between 130 to 135 stores in the longer term. According to Commsec, the company could grow its EPS to 13.7 cents by FY25, which would make the Shaver Shop share price valued at under 9 times FY25's estimated earnings.

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

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