According to analyst projections, the ASX dividend share Dusk Group Ltd (ASX: DSK) could be one of the largest dividend yield payers in 2026.

For readers who haven't heard of Dusk before, it's a retailer of home fragrance products that sells a range of Dusk-branded products from a national store network. Its products are designed in-house and exclusive to Dusk. These include candles, ultrasonic diffusers, reed diffusers, essential oils, and fragrance-related homewares.

Market confidence in the company was heavily hit during the high inflation years of 2022 to 2024, but it is starting to recover.

Let's look at the latest update from the business and then consider its dividend potential.

FY25 half-year earnings recap

For the six-month period to 29 December 2024, Dusk reported total sales growth of 12.3% to $87.4 million (with online sales growth of 68%). Gross profit grew 13.4% and underlying operating profit (EBIT) increased 20%, so the company demonstrated pleasing operating leverage.

Dusk's board of directors decided to pay a 5-cent interim dividend per share and a 5-cent special dividend per share.

The company said its online sales performance was driven by "elevated content, digital marketing and the capabilities" of its new site. The Christmas sales period, critical for the ASX dividend share's overall annual performance, exceeded internal expectations.

The company had net cash of $38.5 million at the end of HY25 and no debt, though that has likely changed somewhat since then. It had $20.8 million net cash at 30 June 2024. Those net cash balances compare to its current market capitalisation of $65.38 million. The company has significant underlying value through its cash and its inventory (which was $15.5 million at the end of HY25).

Trading in the second half of FY25 remained positive, with total sales up 3.7% in the first eight weeks.

Projected dividend yield for the ASX dividend share

The projection on Commsec suggests that the business could pay an annual dividend per share of 11 cents in 2026, which equates to a grossed-up dividend yield of 15%, including franking credits and 10.5% excluding franking credits.

Its dividend yield is high because it's trading at a low price-earnings (P/E) ratio. According to earnings estimates on Commsec, Dusk is trading at just 6.5x FY26's projected profit. Time will tell whether that forecast is close, but profit is predicted to rise strongly in FY25, FY26, and FY27.