ASX dividend stocks can be the ticket to unlocking significant annual passive income.
Ideally, I'd prefer to invest in a business that is regularly growing its profit and dividend because of what that means for wealth-building.
The ASX stock Universal Store Holdings Ltd (ASX: UNI) is a real contender as one of the leading businesses for dividends.
It owns multiple youth fashion brands, namely Universal Store and Perfect Stranger, as well as CTC (trading as THRILLS and Worship). It has more than 110 stores aimed to sell a carefully curated selection of on-trend apparel products to target 16 to 35 year old fashion focused customers.
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Strong dividend potential
The business has grown its annual dividend per share every year since it first started paying one in 2021. For a retailer, I think it has delivered a very pleasing reliable dividend.
Universal Store has delivered pleasing profit growth, which has funded large dividend increases over the last few years.
In FY25 alone, the business decided to increase its annual dividend per share by 8.4% to 38.5 cents. At the time of writing, the business has a trailing grossed-up dividend yield of 6.7%, including franking credits, at the time of writing.
The estimate on CMC Markets suggests the ASX dividend stock could decide to hike its annual payout to 40.2 cents in FY26. That means the business could pay a grossed-up dividend yield of 7%, including franking credits, at the time of writing.
If someone wanted to receive $2,000 of (projected) annual passive income, they'd need to buy 4,976 shares for cash payments. If we're talking about the grossed-up income including franking credits, then someone would need a lesser amount of 3,483 Universal Store shares.
How likely is dividend growth?
Profit growth is the most important factor to influence the company's board of directors to increase the payout for shareholders.
Trading in FY26 was positive in the company's recent update. Direct to customer sales in the first 17 weeks of FY26 were up 13.7% year-over-year. Within that, Universal Store total sales were up 11.4%, Perfect Stranger sales were up 40.5% year over year and CTC sales grew by 14.1% year-over-year.
The business also said that its new store rollout is on track to achieve between 11 to 17 new stores in FY26, with four stores opened in the year to date and another four set to open before Christmas.
With double-digit sales growth in the year to date, I think it looks likely the ASX dividend stock can grow its annual payout again in FY26.
