I think the best ASX stocks to own are ones that can grow their earnings (and dividends) over time. This gives a business the ability to provide both passive income and capital growth. I want to highlight why Nick Scali Ltd (ASX: NCK) could be a top choice today for passive income.
Nick Scali is a furniture retailer that sells through three different business divisions – in Australia, it has Nick Scali and Plush. Nick Scali is also working on a UK expansion plan.
It has an impressive dividend history. The company increased its annual dividend each year between FY13 and FY23. However, profitability has struggled in the annual results since then due to inflation, interest rates, and challenging trading conditions.
But the FY26 half-year result saw a recovery in conditions, profit, and the dividend. It was the largest interim dividend since FY23. Let's look at why this is a good time to invest in the ASX stock for passive income.
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Exciting outlook for the ASX stock
The numbers the business reported for the first six months of the 2026 financial year were very positive.
In HY26, the business revealed that group revenue increased 7.2% to $269.3 million, the gross profit margin improved 310 basis points to 65.4%, operating profit (EBIT) climbed 25% to $68.5 million, and underlying net profit after tax (NPAT) increased 23.1% to $41 million.
Looking at the individual markets, the UK business is going through a transition to Nick Scali branding. It's refurbishing and rebranding a number of stores, which is why UK revenue declined 38.5% to $17.6 million and the underlying net loss worsened by 100% to $5.6 million.
ANZ revenue increased 13.1% year over year, and ANZ net profit jumped 29.4% to $46.6 million.
Statutory net profit jumped 36.4% to $41 million, allowing the business to hike its interim dividend per share by 30% to 39 cents per share.
The performance in January was positive too, with ANZ written sales orders increasing by 3.1% year over year. A further five new stores are confirmed to open in ANZ, and additional opportunities are being reviewed. Extra stores are a big driver of earnings.
A majority of the UK store refurbishment program is now complete, and it has "seen improvement in written sales compared to the prior year". Total January written sales came to $6.7 million.
The four Nick Scali-branded stores in the UK that were trading in both January 2025 and January 2026 saw like-for-like sales growth of 32%. The gross profit margin is steadily rising in the UK, too, as it sells more Nick Scali items.
The projection on CommSec suggests that Nick Scali could pay an annual dividend per share of 78.1 cents in FY26. That translates into a forward grossed-up dividend yield of 6.3% after today's 5% decline in the Nick Scali share price, following a volatile weekend of geopolitical events.
Making $200 a month of passive income
The ASX stock doesn't pay dividends monthly, so it's good to think of the annual total and then divide it by 12.
To reach $200 per month of annual passive income, we're talking about a total of $2,400. To receive that amount, that would require 3,033 Nick Scali shares, assuming the forecast becomes correct.
With the prospect of rising dividends in the coming years, I think this ASX stock is a solid long-term buy, particularly with its potential in the UK for store network growth and margin improvements.
