1 ASX dividend stock down 17% I'd buy right now

The ASX dividend stock Universal Store Holdings Ltd (ASX: UNI) looks to me like one of the most compelling options Aussies can buy for passive income.

It may not get the same level of attention as a name like Commonwealth Bank of Australia (ASX: CBA) or BHP Group Ltd (ASX: BHP), but I think it actually offers far more growth potential than Australia's largest businesses.

For readers who haven't heard of this one before, the company says that it owns a portfolio of premium youth fashion brands, with both retail and wholesale businesses.

This includes Universal Store, Perfect Stranger and CTC (trading as THRILLS and Worship). It's aiming to grow its premium youth fashion apparel brands and retail formats to deliver a "carefully curated selection of on-trend apparel products to target 16-35 year old fashion focused customers."

Let's get into why it's such a great idea to buy right now.

Appealing ASX dividend stock credentials

For me, a key part of the appeal of an ASX dividend stock is a growing dividend. If a payout is growing then it's not being cut.

Impressively, the business has increased its payout each year since it started paying a dividend to investors in FY21 (which is also the financial year it listed). There are not many businesses that can claim they've hiked their payout every year since they listed on the ASX.

The FY25 annual payout translates into a grossed-up dividend yield of 7%, including franking credits. This yield has been unlocked thanks to three key factors: a generous dividend payout ratio, a reasonable price/earnings (P/E) ratio and the recent decline of the Universal Store share price. It's down 17% since 29 October 2025.

The company's dividend is projected to increase in the coming years.

Excitingly, Universal Store's annual dividend per share is forecast to increase to 39.4 cents per share in FY26 and then climb to 44.1 cents per share in FY27. At the time of writing that translates into future grossed-up dividend yields of 7.2% and 8% for FY26 and FY27, respectively, including franking credits.

Is this a good time to invest in Universal Store?

The business is growing strongly with both new stores and strong sales growth at existing stores.

At the latest count, it has 114 physical stores in Australia – it's expecting to open 11 to 17 new stores in FY26 – the company said it's maintaining "prudence in new store and renewal leases".

The ASX dividend stock revealed that in the first quarter of FY26, group direct-to-customer (DTC) sales were up 13.7% year-over-year.

The Universal Store business saw total sales growth of 11.4% and like-for-like sales growth of 7.7%. Perfect Stranger's total sales grew 40.5% with like-for-like sales growth of 13.9%. CTC total sales grew 14.1%, with like-for-like sales growth of 2.3%. Those like-for-like sales numbers say to me that customers are loving the products on offer.

Overall, I'm expecting the company to deliver ongoing earnings growth thanks to its initiatives and sales progress. According to CMC Markets, it's trading at 15x FY26's estimated earnings, which I think is considerably undervalued if it's able to continue growing total sales in the double-digits for the foreseeable future.

The projections on CMC Markets suggest the business could deliver a grossed-up dividend yield of 6.2% in FY26 and 6.9% in FY27, including franking credits.

The post 1 ASX dividend stock down 17% I'd buy right now appeared first on The Motley Fool Australia.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group and Universal Store. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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