Attention ASX income investors: Why the Flight Centre dividend could be ready to rocket

Owners of this ASX travel share may soon receive significantly bigger payouts.

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The ASX travel share Flight Centre Travel Group Ltd's (ASX: FLT) dividend may soon get a major upgrade if the latest prediction comes true. That may be music to the ears of ASX income investors.

The onset of the COVID-19 pandemic led to a significant decline of the company's valuation and a cancellation of Flight Centre dividends.

It took a few years for the dividend to be reinstated, but now it's back. The FY23 dividend was 18 cents per share, though the next couple of years could show enormous growth as regular profit returns for the business.

Flight Centre dividend set to rocket

Using the forecasts on Commsec, the company's earnings per share (EPS) is projected to recover to 90 cents per share in FY24 and then $1.39 in FY25, with the ASX travel share now benefiting from all borders being open, total transaction value (TTV) at full flow and the ASX travel share's margin improvement initiatives delivering.

With that stronger profit generation, analysts are expecting that Flight Centre's board will significantly upscale the shareholder payments.

In FY24, the business is predicted to pay an annual dividend per share of 46.5 cents and then this could rise to 70 cents in FY25 for ASX income investors.

At the current Flight Centre share price, the 2025 financial year payout would represent a cash dividend yield of 3.6% and a grossed-up dividend yield of 5.1%. This would be an increase of around 290% compared to the payout for FY23.

Will profit grow in FY24 and FY25?

ASX income investors shouldn't just focus on income – profit is important too. The company recently said that it has started FY24 in a "solid financial position" and is expecting "more favourable industry dynamics for travellers as competition on international routes increases and as airfare prices gradually start to decrease more significantly."

Flight Centre also said it's expecting further leisure and corporate TTV growth.

Perhaps most importantly, Flight Centre is expecting gradual revenue margin increases and further cost margin decreases, particularly in corporate, as the company targets a 2% underlying profit before tax (PBT) margin for FY25.

According to the profit projection on Commsec, it's valued at 14 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 recommended Flight Centre Travel Group. 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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