The ASX dividend stock Premier Investments Ltd (ASX: PMV) has suffered a 14% decline from 7 February 2025, as the chart below shows. Following this decline, it could be an opportunity for passive income-focused investors.
Premier Investments recently divested its apparel brands business, which included Dotti, Jacqui E, Jay Jays, Just Jeans and Portmans, to Myer Holdings Ltd (ASX: MYR). The remaining Premier Investments business includes a substantial holding of Breville Group Ltd (ASX: BRG), as well as its businesses, Peter Alexander and Smiggle. Peter Alexander is a sleepwear retailer in ANZ and the UK, while Smiggle sells children's stationery in ANZ, Asia, the UK and Ireland.
The business has seen volatility in the last few months, just like most ASX shares. But, at the current price, I think it could be one worth looking at.
The business is a different entity now, one that is focused more on growth, with significant international exposure. But, the dividends can still be appealing.
Broker UBS is predicting Premier Investments' dividend could be pleasing next year and in the subsequent years.
The broker is forecasting an annual payout of 81 cents per share in FY26, 91 cents per share in FY27, 97 cents per share in FY28 and $1.01 per share in FY29.
That means in FY26, the grossed-up dividend yield could be 5.5%, including franking credits. By FY29, the company could be paying a grossed-up dividend yield of 6.8%.
For me, those projected dividends are looking positive.
UBS said that while Smiggle and Peter Alexander UK losses remain in question, the core Peter Alexander Australia and New Zealand "remains strong" and it sees valuation support, particularly considering the holding of Breville shares.
The broker believes the business is trading at least than 14x FY26's estimated earnings, excluding Breville.
UBS said in a note that Smiggle sales have fallen due to the cost of living pressures facing its customers, with the headwind greater in its markets outside of Australia (Ireland, Malaysia, New Zealand, Singapore and the UK).
The broker believes there remains significant opportunities to improve the Smiggle product, with film studio and sporting code collaborations identified by the company. However, UBS said it remains cautious because of the "consumer backdrop and less evidence Smiggle can extend its category and customer reach".
The broker notes that Peter Alexander is a "known gifting brand in ANZ", though it will take time to establish this in the UK. Operations do pose some challenges, such as different product materials required and higher operating costs. UBS thinks Peter Alexander has a "significant opportunity" in the UK, though it recognises it may take total start-up losses of more than $13 million to gain traction.
The ASX dividend stock may look cheap on next year's earnings, it has a lot of potential for future profit growth. UBS is predicting that the company could grow its profit by 43% between FY25 to FY29. That means the Premier Investments share price is valued at 13.5x FY29's estimated earnings.
UBS currently has a price target of $24 on the business, which is where the broker believes the share price will be trading in a year from the investment call.
The price target implies a possible rise of 13.6% from where it is today, plus dividend payments.
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