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Analyst tips 20% upside and 6.5% dividend yield for this ASX share

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If you’re wanting to boost your income with some dividend shares, then you may want to consider Adairs Ltd (ASX: ADH).

It could be one of the best dividend shares to buy right now, according to analysts at Morgans.

Adairs is one of Australia’s leading furniture and homewares retailers thanks to its growing portfolio of brands – Adairs, Focus on Furniture, and Mocka.

It’s fair to say that FY 2022 has been a disappointing year so far due to COVID impacts, which have reduced store trading hours and store visits materially due to lockdowns and Omicron concerns.

However, the company is being tipped to bounce back swiftly by the team at Morgans.

It said: “Demand for ADH’s homewares is showing no sign of underlying weakness. The business has faced multiple challenges in recent months (many of which are in common with other retailers, but some are unique to ADH), but we think the investor should look to what comes next.”

Coming next are its belief that the Focus business will start improving store economics, the new national distribution centre will be delivering efficiencies, and the Mocka business will make its first steps towards an omni-channel strategy.

Morgans added: “These factors underpin an expectation of positive earnings growth in FY23 and FY24, which we do not think are reflected in the multiple.”

In light of this, it will come as no surprise to learn that the broker has an add rating and $3.50 price target on the retailer’s shares. Based on the current Adairs share price of $2.90, this implies potential upside of over 20%.

In addition, Morgans is forecasting fully franked dividends of 19 cents per share in FY 2022 and 26 cents per share in FY 2023. This equates to very attractive yields of 6.5% and 9%, respectively, for investors over the next two financial years.

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