The ASX dividend stock JB Hi-Fi Ltd (ASX: JBH) is one of the most underappreciated ideas out there, in my view. The electronics and appliances retailer has been sold off, but I think this is a great opportunity to invest for the long-term.
As the chart below shows, the JB Hi-Fi share price has dropped by 42% in the past year.
Not many large ASX businesses have fallen that much in a relatively short amount of time. However, I think this ASX dividend stock could be a buying opportunity for contrarian and opportunistic investors.
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It pays to be optimistic
I can understand why the market is pessimistic about the short-term outlook of the business.
Higher interest rates can cause uncertainty and less spending by households. However, I don't expect interest rates to remain this high forever, so pessimism could turn into optimism. Perhaps as early as next year.
In my view, JB Hi-Fi's earnings are more defensive than investors are giving it credit for. Households always need appliances and also certain electronics such as phones and computers are seen as essential for living these days, whether that's work, education, entertainment or communication.
In FY26, the ASX dividend stock reported that underlying operating profit (EBIT) grew 3.8%, while underlying earnings per share (EPS) climbed by 2.9%. With EPS of $4.48, it was able to fund an annual dividend per share of $3.37. That was despite the difficult trading conditions amid the Middle East conflict and elevated inflation and interest rates.
According to the forecast on Commsec, the business is only expected to see a slight decline of EPS to $4.46 in FY27. That translates into a forward price/earnings (P/E) ratio of just 15, which I think is low for this business.
The company is expanding its store network, continuing to work on being as efficient and profitable as possible, and providing good customer service.
Compelling dividend yield
When a share price falls, it pushes up the prospective dividend yield for investors. For example, if a business had a dividend yield of 5% and the share price drops 20%, the dividend yield becomes 6%.
According to the projection on Commsec, JB Hi-Fi is forecast to pay an annual dividend per share of $3.35 in FY27. That translates into a potential dividend yield of 5% excluding franking credits and 7.1% including franking credits.
That's a great dividend yield for a large, stable business like JB Hi-Fi, in my view. If there is a good time to invest in this ASX dividend stock, I think now is a great time. But, there are other shares that could be even better value.
