The ASX dividend stock Accent Group Ltd (ASX: AX1) has an impressive history of paying dividends to shareholders. It could be a compelling business to own as the start of a river of passive income of $2,400 per year, or $200 per month.
It's important to have diversification with a portfolio – don't just rely on one business for all of your income. I'm going to show how Accent can be a good starting option for income investors.
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What is Accent Group?
It started as a wholesale distributor and now it's a large shoe business. The business acts as a distributor for a number of brands including CAT, Dr Martens, Henleys, Herschel, Hoka, Kappa, Skechers, Timberland, Ugg and Vans.
The ASX retail share has its own businesses, including The Athlete's Foot, Glue Store, Stylerunner, Nude Lucy and Trybe.
It has over 800 stores across all of the brands, as well as an impressive e-commerce presence.
How big are the dividends?
Dividends can change every year because they're impacted by how much profit the business makes. It's the board of directors that decides what dividend to pay, assuming the company has some retained profits to pay to shareholders.
Demand for shoes may be inconsistent, particularly this year following all of the inflation and interest rate rises.
Last year the company paid an annual dividend per share of 17.5 cents, which is a grossed-up dividend yield of 12%.
The FY24 dividend is expected to fall, but it could still be 11.1 cents per share according to Commsec. That would be a grossed-up dividend yield of 7.7%, or 5.4% excluding the franking credits element of the payout.
The ASX dividend stock could then grow its payout to 13.2 cents per share in FY25 and then 15.3 cents per share in FY26, according to Commsec. But, remember forecasts can change and they are just guesses.
Making $200 a month from this ASX dividend stock
Accent usually pays a dividend every six months, we'll split an annual total into monthly amounts. An annual payout of $2,400 translates into $200 per month.
To get $2,400 per year as cash in FY24, we're talking about buying 21,622 Accent shares. This would also come with around $1,030 of franking credits, so the grossed-up income would be roughly $3,400.
The franking credits can offset tax for people who work full-time. For retirees in a low (or no) tax bracket, it could be a helpful after-tax boost to the returns.
In FY25, owning 21,622 Accent shares could pay $2,854 cash and in FY26 it could pay $3,308 cash.
Can profit grow?
Accent's profit is likely to fall in FY24 because of the economic conditions. But, it could grow in the subsequent years thanks to a recovery of household finances and spending, more stores being opened, selling more online, greater scale benefits and possibly growth of the number of brands in its portfolio.
By FY26, the company could be generating 16.6 cents of earnings per share (EPS), which would put the current Accent share price at 12 times FY26's estimated earnings.
