The ASX dividend share Metcash Ltd (ASX: MTS) could be a dark horse for dividend income in the coming years, particularly with the prospect of positive tailwinds occurring for the company.
Metcash is a key wholesale distributor in Australia. Its food division supplies IGA supermarkets across the country, while it also has a foodservice component which supplies commercial customers such as hotels, restaurants, cafes and so on. The liquor division supplies a wide range of independent liquor stores such as IGA Liquor, Bottle-O and Cellarbrations.
The company is the second largest player in the hardware market, it owns the businesses Mitre 10, Home Hardware, Total Tools, Alpine Truss, Bianco Construction Supplies and more.
After a difficult year or two for the hardware division because of weak construction activity, things look as though they're going to turn around for the business, making Metcash a compelling option for dividends.
Next payout
After a challenging FY25, analysts are projecting that the company's earnings could increase by approximately 10% to $300 million in FY26 (and another 10% in FY27).
The RBA cash rate cuts we've already seen this could be helping turn around demand. While Nick Scali Ltd (ASX: NCK) and Metcash's hardware division are not in the same industry, I think growth for the furniture retailer is a promising sign. The ASX dividend share recently reported growth of 7% in July 2025, which I believe bodes well for other household spending.
After Metcash reported its FY25 result, broker UBS commented on Total Tools and the wider hardware division:
Both businesses have been a source of underlying sales & EBIT declines due to subdued trade activity and cost of living pressures. The pace of improvement is mixed; IHG (Mitre 10) is showing signs of improvement from 4Q25 onwards, while Total Tools (TT) remains subdued with LFL sales down to start 1H26E. Looking forward, lower interest rates should support trade activity and ease cost of living pressures, with operating leverage at retail & wholesale a driver of forecast EBIT margin expansion.
This could help the business fund a higher dividend payout of 19 cents per share. That translates into a forward grossed-up dividend yield of 6.8%, including franking credits.
Big income projected for the ASX dividend shares
UBS projects the business to increase its payout every year between FY25 to FY29.
That could be a great characteristic for investors focused on passive income. But the profit growth, if that happens, could also lead to share price growth for Metcash – the market loves profit growth. It's only valued at 13x FY26's estimated earnings.
UBS analysts are suggesting that Metcash's annual dividend per share could reach 24 cents in FY29. At the current Metcash share price, its FY29 payout projection translates into a grossed-up dividend yield of 8.5%, including franking credits.
