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Shaver Shop Group Ltd (ASX: SSG) shares might be an excellent source of passive income in the coming years. The ASX dividend share could pay an enormous dividend yield in FY26 if a forecast proves correct.
One of the benefits of investing in ASX retail shares is that they typically trade on a lower price/earnings (P/E) ratio, which can help enable a greater dividend yield.
Shaver Shop is among the largest retailers of male and female hair removal products. It has more than 120 stores in Australia and New Zealand and an online presence on its own websites, as well as eBay, Amazon, TradeMe, and MyDeal.
The company also offers oral care, hair care, massage, air treatment, and beauty products.
Low valuation
I mentioned retailers can have low P/E ratios, and Shaver Shop is no exception.
According to the estimate on Commsec, Shaver Shop is projected to generate earnings per share (EPS) of 13.2 cents in FY26.
At the current Shaver Shop share price of $1.14, that translates into the company trading at 10x FY26’s estimated earnings, which I think represents a low valuation considering the ASX dividend share could generate EPS growth between now and FY26.
Growing businesses are normally valued at a higher earnings multiple by investors to take into account the potential profit the business may make in the future.
Large dividend yield expected
No business is guaranteed to pay a dividend – it’s not bank interest.
Interestingly, Shaver Shop has grown its annual dividend every year since it first started paying one in 2017. This growth streak is not guaranteed to continue. Indeed, the estimates on Commsec imply a dividend cut may be on the cards in FY24, though the FY24 interim payout was maintained at 4.7 cents per share.
The forecast on Commsec suggests Shaver Shop could pay an annual dividend per share of 10 cents in FY26. This would translate into a grossed-up dividend yield of 12.6%.
If that payout happens, it would be a huge yield for shareholders, but it could certainly be possible considering the last 12 months amounted to a grossed-up dividend yield of 12.8% amid difficult retailing conditions.
Shaver Shop can grow its profit in the future by adding more stores, benefiting from Australia’s growing population and adding more brands to its portfolio, such as Skull Shaver.