Owning ASX dividend stocks can be a very rewarding experience. Large dividend yields with possible capital growth — what's not to like?
However, not all high dividend yields last forever. Sometimes, a large payout in one year may be much smaller in the subsequent year. For example, BHP Group Ltd (ASX: BHP) recently cut its interim dividend by 20% to US 72 cents per share. The broker UBS thinks the dividend will decline in size in FY26, FY27, and FY28.
I'm going to talk about two ASX dividend stocks where the long-term profit growth looks promising, and the current dividend yields are large.
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Shaver Shop Group Ltd (ASX: SSG)
This ASX retail share is a specialty retailer of male and female grooming products. It wants to be the market leader in everything related to hair removal in Australia.
It aims to sell a wide range of quality prices at competitive prices, with "excellent staff product knowledge". The company says it's able to negotiate exclusive products with suppliers.
Shaver Shop is looking to diversify its earnings by selling products in oral care, hair care, massage, air treatment, and beauty categories. It can grow its earnings by opening more stores, increasing its online sales, offering more products, and benefiting from Australia's population growth.
Shaver Shop has grown its dividend each year since 2017, when it started making payments to shareholders. The last two dividend payments from the ASX dividend stock equate to a grossed-up dividend yield of 12.7%.
Metcash Ltd (ASX: MTS)
Metcash supplies many independent businesses in Australia, including IGA, Foodland, Cellarbrations, The Bottle-O, IGA Liquor, Porters Liquor, Camel, Big Bargain Bottleshop, and Duncans. It also supports bars, pubs, restaurants, and hotels.
The ASX dividend stock also has a hardware division that owns a number of brands, including Mitre 10, Home Timber & Hardware and Total Tools. It supports small operators under the brands Thrifty-Link Hardware and True Value Hardware.
Metcash also recently announced it's buying Bianco Construction Supplies, Alpine Truss and Superior Food. Each of these businesses add diversification to Metcash's earnings and open up another growth avenue.
It can grow profit through opening more stores, increasing online sales, and the overall growth of Australia's population. There could also be a rebound in hardware demand once interest rates start to reduce.
Metcash has committed to a dividend payout ratio of 70% of underlying net profit after tax (NPAT), which is a healthy payment. It's enough for a good dividend yield, but the ASX dividend stock also keeps a useful amount within the business for re-investment.
According to Commsec, the company is estimated to pay an annual dividend per share of 20 cents per share in FY24, which would be a grossed-up dividend yield of 7.3%.
