I’m always on the lookout for ASX dividend shares that can pay attractive income for the long-term. In this article I’ll give a quick run through on two names:
Magellan Financial Group Ltd (ASX: MFG)
This is a fund manager business which is one of the largest in Australia. In its latest monthly update for October 2020, it said that its funds under management (FUM) had reached almost $103.5 billion. That month included $601 million of net inflows.
The base management fees alone help generate attractive profits for Magellan, which funds the solid and growing dividends from Magellan, which has been growing for years.
In FY20 it grew its average funds under management (FUM) by 26% to $95.5 billion. Underlying profit/earnings per share went up 17% to 241.5 cents, which helped the total annual dividends per share increase by 16% to 214.9 cents.
At the current Magellan share price of around $57.50, that’s a trailing partially franked dividend yield of 3.7%. I think that’s a good starting yield for an ASX dividend share.
Future FUM growth, new investment bank Barrenjoey and a potential retirement product could boost FUM and profit in the future years.
Magellan does have a fairly high dividend payout ratio, but it doesn’t need to hold onto a large amount of capital to keep growing nicely.
MFF Capital Investments Ltd (ASX: MFF)
MFF Capital is one of the highest-performing listed investment companies (LIC) on the ASX. It’s run by Chris Mackay, who is actually a co-founder of Magellan and owns a large amount of shares.
Whilst with Magellan you’re investing for the FUM, with MFF Capital the returns are decided by its underlying holdings.
At the end of November 2020, its largest positions of 2% or more were: Visa, MasterCard, Amazon, Home Depot, Facebook, CVS Health, Berkshire Hathaway, Bank of America, Prosus, Microsoft, CK Hutchison and Intercontinental Exchange.
A LIC makes profits from the investment returns – both growth and income. The LIC’s board of directors can then choose to payout most, some or none of the profit out as a dividend.
MFF Capital is steadily growing its dividend and earlier this year stated the goal of reaching an annual payment of 10 cents per share. At the current MFF Capital share price of $2.76, that represents a fully franked dividend yield of 3.6%. I think that’s a solid starting yield for an ASX dividend share.
It’s also important to note whether the LIC is trading at a premium or discount to its net tangible asset (NTA) value. At the end of November 2020, MFF Capital had a (pre-tax) NTA per share of $2.86. That means the current share price is at a 3.5% discount to the NTA. In other words, you can buy $1 of shares for 96.5 cents. Not bad for a strong LIC.
There are also other ASX dividend shares that I’ve got my eyes on including Brickworks Limited (ASX: BKW).
