Many investors have steered clear of discretionary retail shares this year, sending the Super Retail Group Ltd (ASX: SUL) share price down 14% since January. In contrast, the S&P/ASX 200 Index (ASX: XJO) has lifted 1.5% year-to-date.
After the recent decline in its share price, S&P Capital IQ currently values Super Retail Group shares at 13x FY25 earnings estimates.
Historically, Super Retail Group shares have traded at both single-digit and higher multiples, including during the COVID-19 crisis. The current price-to-earnings (P/E) ratio is around the mid-point of its trading range of 8x to 18x.
At the current share price, Super Retail offers a fully-franked dividend yield of 5.6%. While this yield may not be the highest on the ASX, investors should consider the company's earnings resilience and dividend outlook.
Given these factors, is Super Retail Group the optimal ASX dividend share to consider for investment today?
Resilient earnings
Super Retail Group operates a diverse portfolio of retail brands — including Supercheap Auto, Rebel, BCF, and Macpac — across Australia and New Zealand.
Despite challenges in the retail sector, Super Retail Group has demonstrated robust earnings resilience.
The company reported mixed sales growth in its second-half trading update, with Supercheap Auto sales increasing 1% and BCF sales falling 5%.
In the longer term, its earnings per share (EPS) have increased from 41 cents in FY15 to $1.15 in the last 12 months to December 2023.
While its earnings inevitably swing through ups and downs of economic cycles, the company shows a relatively stable trend compared to other ASX consumer discretionary shares. For example, its EPS fell from 70 cents in FY19 to 55 cents in FY20 during the COVID-19 crisis before recovering to 1.32 in FY21.
The company's ability to maintain stable earnings amidst fluctuating consumer sentiment and economic conditions highlights its effective management of costs and strategic positioning in essential retail segments.
This resilience underscores Super Retail Group's capability to navigate market uncertainties and sustain shareholder value over the long term.
What about Super Retail's dividend history?
Super Retail Group's commitment to paying consistent and fully-franked dividends, even in tough economic conditions, demonstrates its dedication to shareholder value.
The company has a strong track record of consistently paying dividends to its shareholders. Over the years, its dividend per share (DPS) has increased from 40 cents in FY15 to 76 cents in the last 12 months ending December 2023.
The company maintains generous dividend payout ratios of between 50% to 90%. Even during challenging times, such as the COVID-19 pandemic in FY21, Super Retail Group paid out 51% of its earnings as dividends.
Additionally, the company has always provided 100% franking credits on its dividend payments, enhancing the returns for its shareholders.
Foolish takeaway
Despite some concerns over economic uncertainty and consumer spending, I believe Super Retail Group remains one of the top choices among ASX dividend shares today.
