When considering dividend income stocks, it's essential to focus on those that offer both strong growth and reliable payouts. Companies that demonstrate a capacity for increasing earnings can provide attractive dividends and enhance investor value over time. Here are two ASX dividend stocks that exemplify these qualities:
Collins Foods Ltd (ASX: CKF)
Collins Foods, a prominent franchisee of KFC outlets across Australia, the Netherlands, and Germany, has seen its share price decrease by 25% since the start of the year. This decline has made its valuation more appealing compared to previous months. The company has a strong track record of dividend payments, having increased its annual dividend payout every year since 2014. This decade-long consistency is notable, particularly given the challenges of recent years, including the global pandemic.
The company's strategy includes a steady rollout of new stores and acquisitions to enhance its market presence. The most recent dividends declared amount to 28 cents per share, translating to a grossed-up dividend yield of 4.4%. Looking ahead, estimates suggest that the dividend yield could rise to 5.9% by FY26, supported by anticipated earnings per share growth to 65.8 cents. As cost growth slows and inflation settles, Collins Foods is poised for continued expansion and strong future performance.
Universal Store Holdings Ltd (ASX: UNI)
Universal Store Holdings operates a diverse portfolio of youth fashion brands, including Universal Store, THRILLS, and Worship, along with its newly standalone Perfect Stranger brand. The company has expanded its physical presence to 102 stores across Australia and has a robust online retail operation. A key growth strategy involves opening new stores under its various brands.
In the second half of FY24, Perfect Stranger saw a 11.5% increase in like-for-like sales, while Universal Store's total sales grew by 9.7%. Despite a strong performance over the past year, the share price remains approximately 30% below its peak from November 2021.
Universal Store has consistently increased its annual dividend since it began paying passive income in the first half of 2021. The current grossed-up dividend yield stands at around 6%, with forecasts suggesting it could exceed 8% by FY26. The company's valuation remains attractive, priced at under 12 times FY26’s estimated earnings.
These insights into Collins Foods and Universal Store Holdings reveal their potential as strong dividend-paying investments, offering a mix of growth prospects and income generation.