Here are 2 ASX 200 dividend shares to think about for income.
The post 2 ASX 200 shares that could be buys for dividends appeared first on The Motley Fool Australia. –
There are few S&P/ASX 200 Index (ASX: XJO) dividend shares that could be good ideas to consider.
Income is hard to come by at the moment with the official Reserve Bank of Australia (RBA) interest rate being close to 0%. Businesses with attractive dividend yields could be the way to go to boost investment income.
Here are two ASX 200 dividend shares to consider:
Centuria Industrial REIT (ASX: CIP)
This business is a real estate investment trust (REIT) that owns a quality portfolio of industrial properties across Australia, predominately in metropolitan areas.
After its latest acquisitions, it will have a total of 75 assets with a total value of around $3.5 billion. The occupancy rate is 97.3% and it has a weighted average lease expiry of nine years.
Its portfolio is invested across different sectors including distribution centres (36%), manufacturing (25%), data centres (15%), transport logistics (14%), cold storage (8%) and development (3%).
Looking at its tenants, some of the largest (in terms of rental income) includes Telstra Corporation Ltd (ASX: TLS), Arnott’s, Woolworths Group Ltd (ASX: WOW), Visy and Australian Pharmaceutical Industries Ltd (ASX: API).
In FY22, the ASX 200 dividend share is expecting to generate funds from operations (FFO) – net rental profit – of no less than 18.1 cents per unit and pay a distribution of 17.3 cents per unit. That means the Centuria Industrial REIT share price is valued at 21x FY22’s estimated FFO. It’s expecting to pay a distribution yield of 4.5% in FY22.
The broker Macquarie Group Ltd (ASX: MQG) rates Centuria Industrial REIT as a buy. It’s expecting the distribution yield in FY23 to be 4.8%.
Metcash Limited (ASX: MTS)
Metcash is a diversified business.
It’s the largest supplier for independent supermarkets in Australia, supplying more than 1,600 stores including IGA and Foodland.
Metcash also says it’s the second largest player in the liquor market, supplying more than 90% of independent liquor stores in Australia, including national brands like IGA Liquor, Bottle-O and Cellarbrations.
The company is also the second largest player in the Australian hardware market. It owns the Mitre 10 and Home Timber & Hardware brands. A recent addition has been Total Tools. A few months ago it actually increased its ownership of Total Tools from 70% to 85% for a cost of $59.4 million.
Metcash believes that Total Tools has significant growth opportunities, including expansion of the store network and the acquisition of an ownership interest in a select number of stores. Metcash has a pathway to full ownership towards the end of FY24 with put and call arrangements in place.
FY21 saw underlying earnings per share (EPS) increase by 13.3% to 24.7 cents. This allowed Metcash to increase the total dividend by 40% to 17.5 cents. The ASX 200 dividend share has increased its payout ratio to 70% of underlying net profit.
In FY22, Metcash is seeing a single digit decline of food sales with the loss of contracts like 7-Eleven. However, liquor sales were up 9.5% and hardware sales were up 16.3% in the first 16 weeks of FY22.
UBS currently rates Metcash shares as a buy, with a price target of $4.60. A change of consumer habits appears to have helped the business, including higher levels of local shopping. Some of these changes could be permanent.
The broker believes Metcash could pay a grossed-up dividend yield of 6.5% in FY22.
Should you invest $1,000 in Metcash right now?
Before you consider Metcash, you’ll want to hear this.
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*Returns as of August 16th 2021
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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 owns shares of and has recommended Macquarie Group Limited and Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.