During earnings season, we see stock prices swing significantly based on results. One worth considering before it reports on Friday is dividend stock Accent Group Ltd (ASX: AX1).
Accent Group Ltd (ASX: AX1) is a footwear and clothing retailer, wholesaler, and distributor. It owns and operates more than 800 retail stores across Australia and New Zealand and has exclusive distribution rights for an extensive portfolio of original and international brands.
It has had a rough year to date, falling more than 33%.
However, it could be a buy low candidate, particularly if Friday's earnings results are positive.
Strong dividends
Regardless of its stock price, AX1 offers strong dividend yields.
Dividend yield is the annual dividend payments per share expressed as a percentage of that share's current price.
This dividend stock is expecting fully franked dividends of 7.4 cents per share in FY 2025 and then 9.5 cents per share in FY 2026.
This translates to a yield between 4.5 and 6%.
Experts tipping upside
Combined with the passive income potential of strong yields, AX1 also is undervalued according to several brokers.
Jabin Hallihan, Family Financial Solutions (via The Bull) referenced a price target of $2.11 for this dividend share back in July.
He said the company's performance has been impacted by subdued demand in the lifestyle footwear market, but economic tailwinds point to a potential rebound.
This would mean a rise of more than 33% for this dividend share if it reached the target of $2.11 per share.
Elsewhere, Bell Potter has a buy rating and $1.90 price target on its shares, indicating 20% upside.
Consumer discretionary rebound
If interest rates continue to decline, we may see a boost for consumer discretionary shares. Lowering borrowing costs can make it easier for consumers to finance non-essential purchases.
Additionally, lower rates often increase disposable income and consumer confidence. This can drive higher spending in categories such as fashion/lifestyle – the main product of Accent Group.
As The Motley Fool's Tristan Harrison pointed out earlier this month, some earnings results from other consumer discretionary shares have indicated cost of living pressures and inflation may have begun to ease.
If that's the case, AX1 could be an undervalued dividend stock offering upside and passive income.
