Invest $10,000 in this ASX dividend stock for $550 per year in passive income

Big returns and passive income could be on the cards for investors according to Morgans.

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If you are looking for passive income from ASX dividend stocks, then it could be worth considering Universal Store Holdings Ltd (ASX: UNI).

That's the view of analysts at Morgans, which see plenty of value in its shares at current levels.

In addition, the broker is forecasting dividend yields that are comfortably ahead of market averages.

Let's see what a $10,000 investment in Universal Store's shares could turn into.

What is Universal Store?

Firstly, in case you're not familiar with the company, let's take a quick look at Universal Store.

Universal Store owns a portfolio of premium youth fashion brands and omni-channel retail and wholesale businesses.

Its principal businesses are Universal Store and the Thrills, Worship, and Perfect Stranger brands.

At present, the company operates 100 physical stores across Australia, in addition to online channels. It notes that its strategy is to grow and develop its premium youth fashion apparel brands and retail formats to deliver a carefully curated selection of on-trend apparel products to a target 16-35 year-old fashion focused customer.

$10,000 invested in this ASX dividend stock

If you were to invest $10,000 (and an extra $2.97) into the company's shares, you would end up owning 2,029 units.

According to a note out of Morgans, its analysts have an add rating and $6.50 price target on its shares. This implies potential upside of almost 32% for investors and would value your holding at $13,188.50.

Commenting on its bullish view, Morgans said:

Our positive view about the fundamental long-term appeal of Universal Store as a retail proposition and investment opportunity is undiminished. The growth opportunities are in place. Universal Store's women's banner Perfect Stranger is performing well, justifying an acceleration in its network expansion; the prospect of building out the wholesale distribution channels acquired with CTC is compelling; and customers continue to respond well to the Universal Store banner, rendering its plan to grow this network to more than 100 stores more than reasonable. Although its core youth customers are far from buoyant, they continue to spend.

And let's not forget the passive income. Morgans expects the ASX dividend stock to pay fully franked dividends of 26 cents per share in FY 2024 and then 29 cents per share in FY 2025. This represents yields of 5.3% and 5.9%, respectively.

Let's imagine that this means fully franked dividends of 27.5 cents per share over the next 12 months (the final dividend of FY 2024 and the interim dividend of FY 2025), this would mean passive income of approximately $558 from your shares.

Combined, that's a very healthy 12-month return on investment of approximately $3,750. Not bad if you ask me!

Motley Fool contributor James Mickleboro has positions in Universal Store. 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 no position in any of the stocks mentioned. 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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