The ASX dividend stock Accent Group Ltd (ASX: AX1) has dropped 62% (at the time of writing) since December 2024, as the chart below shows. This could prove to be an effective and contrarian time to buy into the ASX retail share.
The company is the owner of a number of shoe retailers in Australia such as The Athlete's Foot, Stylerunner, Nude Lucy, Platypus and more.
Accent is also the retailer of a number of global brands including Hoka, Ugg, Skechers, Vans, Timberland, Merrell and Herschel.
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How good could the payout be?
The business is facing difficult retailing conditions. Broker UBS' recent survey of around 1,000 Australian adults suggested that spending intentions for lifestyle footwear imply Accent will be negatively impacted by weakness.
The ongoing weakness in the footwear subsector of retail would explain why the market and analysts are not as optimistic about the company's earnings as they were a year ago.
Despite expectations that Accent's net profit could drop to $45 million in FY26, UBS' forecasts suggest that the ASX dividend stock may pay an annual dividend per share of 5 cents in FY26.
This means the business could deliver a grossed-up dividend yield of 7.6%, including franking credits.
More importantly, the dividend per share is projected to increase in the subsequent years – 6 cents in FY27 and 8 cents in FY28.
By FY28, the business could offer investors a grossed-up dividend yield of 12% (including franking credits), at the current valuation, according to UBS' numbers.
Is this a good time to invest in the ASX dividend stock?
I think it looks like it is a good time to buy for a few different reasons.
Firstly, Frasers has increased its holding of Accent shares to 21.32% of the business. That's a good sign that Frasers still believes in the company's future and that it remains good value, even if no future takeover offer eventuates.
Second, the rollout of Sports Direct Australia stores (in partnership with Frasers) will take significant investment upfront, but could unlock a lot of earnings thanks to the Frasers brands it opens up including Everlast, Karrimor, Slazenger, Lonsdale and more.
The key to deciding Accent's return will be whether its earnings can rebound in FY27 and onwards. It looks cheap if it can just rebound modestly.
UBS is expecting the ASX dividend stock's operating profit (EBIT) margin to climb from 5.9% in FY26, to 6.5% in FY27, 7.2% in FY28, 7.6% in FY29 and 8.2% in FY30. With that in mind, I think the business is an underrated buy right now.
