There is a group of ASX shares with dividend yields of more than 5%. That means that $1,000 invested could produce an annual income of more than $50 from that investment.
Higher dividend yields may not always be desirable. It could mean a high dividend payout ratio, which leaves less profit for re-investment for growth. A lower valuation can also lead to a higher yield, but a lower price/earnings ratio can also have implications.
However, there are some ASX dividend shares that have both a high dividend yield and are generating underlying growth:
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Pacific Current Group Ltd (ASX: PAC)
Pacific describes itself as a multi-boutique asset management outfit dedicated to providing exceptional value to shareholders, investors and partners. It applies its strategic resources, including capital, institutional distribution capabilities and operational expertise to help its partners grow. At the end of April 2021, it had 15 boutique asset managers globally.
It's currently rated as a buy by the broker Ord Minnett. It has a price target on Pacific Current of $6.70, which suggests the share price could increase by more than 10% over the next 12 months.
Pacific continues to see growth of its funds under management (FUM). This can help increase the underlying profitability of the business (excluding the impacts of performance fees year to year).
In the quarter ended 31 March 2021, its total FUM rose 8.9%. Including the new investment in Astarte Capital Partners, FUM went up by 9.3%.
Pacific said that it continues to see "strong" inflows across the portfolio, including GQG, ROC, Carlisle, Proterra and Victory Park.
At the time of the quarterly update, Pacific Current Paul Greenwood said:
While GQG continued to post large FUM gains, we were again encouraged by the breadth of growth across the portfolio. As we emerge from the pandemic it appears that many of our portfolio companies are very well positioned to grow, and as a result we expect continued capital raising success in 2021 and 2022.
According to Ord Minnett, at the current Pacific Current share price, the ASX dividend share offers a projected grossed-up dividend yield of 9% for FY22.
Accent Group Ltd (ASX: AX1)
Accent is a large shoe business in Australia which sells through a wide variety of stores and has a number of exclusive distribution agreements in the country.
The company has a number of different initiatives to continue growing its revenue and margins.
Accent is looking to increase its percentage of sales made online to 30% over time.
It's looking to continue to rollout more stores to increase its customer reach and grow economies of scale. Accent was expecting to open at least 90 new stores in FY21 across all banners. It's going to keep opening stores in FY22.
The ASX dividend share expects The Athlete's Foot franchise buyback program to recommence from late 2021. The Athlete's Foot continues to improve its gross profit margin with distributed brands and vertical products. It's also opening more stores across its different brands. For example, 12 to 15 PIVOT stores are expected to be trading by June 2021. The Stylerunner store in Armadale is/was performing well ahead of expectations and the company expected four Stylerunner stores to be trading by June 2021.
In the first eight weeks of the second half of FY21, like for like retail sales were up 10.7% on the prior corresponding period.
Regarding dividends, Accent says it continues to be defined by "strong cash conversion and the consistent strong returns it delivers on shareholders' funds."
According to Commsec, at the current Accent share price, it offers a forecast FY21 grossed-up dividend yield of 6.6%.
