Is Flight Centre about to regain ASX dividend share status?

Owning Flight Centre Travel Group Ltd (ASX: FLT) shares used to be very rewarding for receiving dividends.

The appearance of COVID-19 in early 2020 was a setback for the world for many reasons, including its impact on travel demand. But if things continue going well, Flight Centre could soon become a good ASX dividend share to invest in again.

One of the five largest travel agencies in the world, Flight Centre operates more than 2,000 leisure, corporate and wholesale businesses in 11 countries. It has more than 450 stores across Australia, New Zealand, South Africa, Canada and the United Kingdom.

Can strong dividends return?

In FY19, the company paid an annual ordinary dividend per share of $1.58. At the current Flight Centre share price, that would translate into a cash dividend yield of 7.3% and a grossed-up dividend yield of 10.4%.

Things have changed a lot since then.

There are more Flight Centre shares on issue after the company's capital raising to ensure its survival through COVID-19. Plus, it hasn't been as profitable up until now because of all of the COVID-19 impacts.

However, there may be light at the end of the dividend-starved tunnel for Flight Centre investors.

At the end of FY23, it revealed a dividend of 18 cents per share. The dividends could be about to be much bigger.

The estimate on Commsec suggests the business could pay an annual dividend per share of 48 cents in FY24, which is the current financial year. That would be a grossed-up dividend yield of 3.2%.

In FY25, the annual dividend per share could grow again to 70.9 cents. This would equate to a grossed-up dividend yield of 4.7%.

While that's not the biggest yield in the world, the ASX dividend share would challenge what we can get from savings accounts at the moment.

Can profit growth continue?

At its AGM, the company said it expected leisure and corporate sales growth in FY24 as both sectors progressed towards a full recovery, with that complete recovery expected late this year. This suggests a boost for FY25 as well.

Flight Centre advised it expected a stronger profit margin as the revenue margin increased and the cost margin decreased.

The company also noted there would be better market dynamics for travellers as competition and capacity improved.

Finally, IATA projections of 3.4% compound annual growth in passengers globally through to 2040 would prove to be a useful tailwind for the company.

Flight Centre share price snapshot

After a rise of almost 20% in the company's shares in the past year, it's currently trading at 16x FY25's estimated earnings.