ASX dividend shares with large dividend yields could pay pleasing passive income in 2025 and beyond.
Higher interest rates have thrown up a lot of uncertainty for some sectors, like ASX retail shares. Lower share prices boost the dividend yield on offer, though the FY24 profit and payout could see declines. That's why I'm looking ahead to 2025 (meaning FY25), when economic conditions may be improving.
As an example, when a business has a 5% dividend yield and the share price falls 10%, the dividend yield becomes 5.5% and a 30% fall leads to a 6.5% dividend yield.
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Adairs Ltd (ASX: ADH)
Adairs is a retailer of furniture and homewares through its Adairs, Focus on Furniture and Mocka businesses. Understandably, some shoppers are spending a bit less at these stores at the moment.
In the first 21 weeks of FY24, Adairs group sales fell by 9% year over year. But, the Adairs share price is down over 60% from June 2021. Teething issues at its new distribution centre has caused the dividend to be paused. But, at the current low Adairs share price, it could be a large dividend yield when dividends return.
The estimate on Commsec suggests Adairs could pay an annual dividend per share of 14.5 cents in FY25, which would be a grossed-up dividend yield of 11.5%. The ASX share is valued at 8 times FY25's estimated earnings.
The dividend is projected to jump again in FY26, but let's not get too ahead of ourselves.
Pacific Current Group Ltd (ASX: PAC)
Pacific Current is a business that invests in other funds management businesses and helps them grow. These fund management businesses are from around the world, so there's good diversification across Pacific Current.
The ASX share helps fund managers grow with its expertise and capital. The biggest fund manager in the portfolio is GQG Partners Inc (ASX: GQG), a long-term investment. But, there are several other growing businesses.
This ASX share trades on a low price/earnings (P/E) ratio, which is a natural boost for the dividend yield.
In FY24, the business is expecting "substantial growth" in revenue and profit, with between $2 billion to $5 billion of new commitments, excluding GQG.
According to Commsec, the company could grow its annual dividend per share to 52.2 cents in FY25. This would be a dividend yield of 6%.
Reject Shop Ltd (ASX: TRS)
Reject Shop is a discount retailer that aims to provide "great value on everyday items" and wants to help "all Australians save money every day". It has a range of its own brands, including Cadbury, Tresemmé, Tontine, Nivea, Pepsi, Finish, Omo and Uncle Tobys.
The business reported good growth in FY23 (on a 52-week basis), with sales growth of 5.8%, earnings before interest and tax (EBIT) growth of 35.7% and net profit after tax (NPAT) growth of 63.4%. At the end of FY23, the ASX share had 380 stores, up from 369 at the end of FY22.
Reject Shop is seeing strong customer demand in FY24, so this could help revenue grow further and it also wants to grow its profit margins.
Commsec numbers suggest Reject Shop's earnings per share (EPS) could soar to 40.5 cents and fund an annual dividend per share of 24 cents. That puts the current Reject Shop share price at 13 times FY25's estimated earnings with a grossed-up dividend yield of 6.4%.
