Wesfarmers and Magellan could be good options to consider for dividend income.
The post 2 ASX 200 shares that could offer good dividend income appeared first on The Motley Fool Australia. –
A number of S&P/ASX 200 Index (ASX: XJO) shares could be interesting for investors to consider as options for good dividend income.
There were quite a few big dividend cuts during the difficult 2020 year which saw COVID-19 impacts reach far and wide. Westpac Banking Corp (ASX: WBC) and Flight Centre Travel Group Ltd (ASX: FLT) were just two examples of heavy dividend reductions.
But these two businesses continued to make profit and pay dividends to shareholders. They have ongoing commitments to shareholder returns:
Magellan Financial Group Ltd (ASX: MFG)
Magellan is one of the largest funds management businesses in Australia.
In the latest monthly update, the ASX 200 share announced that its funds under management (FUM) had increased $3.1 billion to $117 billion over the month of July 2021. The biggest increase was with its global equities strategies, with an increase of FUM from $85.4 billion to $87.9 billion.
The business is currently rated as a buy by the broker Morgans with a price target of $58.05. That suggests a potential increase of the share price over the next 12 months of more than 10%.
Magellan has a stated dividend policy for shareholders. Ordinary interim and final dividends will be based on 90% to 95% from the funds management business excluding crystallised performance fees. The annual performance fee dividend is also 90% to 95% of net crystallised performance fees after tax.
In the first half of FY21, the ASX 200 share grew its interim dividend by 5% to 97.1 cents per share. That was after half-year net profit after tax grew 3% to $202.3 million. Magellan’s funds management business saw profit before tax and before performance fees grow 8% to $256.2 million. Its external investments, like Guzman y Gomez may be able to help grow profit in the future too.
Morgans has forecast a FY22 dividend of $2.31 per share, equating to a partially franked forward dividend yield of 4.5%.
Wesfarmers Ltd (ASX: WES)
The leadership at Wesfarmers are focused on dividends and shareholder returns.
Indeed, the company has stated:
Wesfarmers’ primary objective is to provide a satisfactory return to shareholders.
It points out how between FY16 and FY21, it has paid more than $14 billion of fully franked dividends for shareholders. Whilst it’s investing for the long-term, it also says it has an ongoing focus on shareholder returns with an approach underpinned by maximising the value of franking credits for shareholders.
The ASX 200 share notes that it has achieved long-term earnings growth and strong cashflow generation. It has a portfolio of businesses with strong market positions such as Bunnings, Officeworks, Kmart and Catch.
Wesfarmers aims to be flexible and opportunistic with a disciplined approach to all investment decisions. It’s always on the look out for adjacent opportunities (such as Catch) as well as value-accretive transaction.
The company is looking to improve its operations by establishing a market-leading digital ecosystem that spans its retail businesses. It’s going to invest around $100 million to develop this ecosystem.
Wesfarmers is also investing in its platforms for long-term growth. For example, it’s investing in Catch to become the leading Australian marketplace. It wants to grow Bunnings’ commercial offering. The company is also investing in its supply chain capabilities so that it can become more efficient, with lower costs.
According to Commsec, at the current Wesfarmers share price, it has a FY22 grossed-up dividend yield of 4.2%.
The post 2 ASX 200 shares that could offer good dividend income appeared first on The Motley Fool Australia.
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Motley Fool contributor Tristan Harrison owns shares of Magellan Financial Group. 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 Wesfarmers Limited. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.