Some ASX 200 (ASX: XJO) shares are high quality dividend stocks in my opinion. They combine a good yield with a track record of reliability.
They may not produce the strongest total returns overall, but I think a combination of solid dividends and decent capital growth can mean they outperform the overall ASX 200 whilst delivering good income.
Here are three dividend pick ideas:
Magellan Financial Group Ltd (ASX: MFG)
Magellan is a listed fund manager which runs three key strategies for investors – international shares, infrastructure shares and Australian shares. Its long term performance of the portfolios has attracted a lot of funds, Magellan now has around $103 billion of funds under management (FUM).
In FY20 the ASX 200 share grew its ordinary dividend by 22% to 184.5 cents per share. Including the performance special dividend, the total dividend went up 16% to 214.9 cents.
One of the main reasons why I think Magellan can keep growing its dividend over the longer term is because the company is making investments into operating businesses which could be a sign it’s planning to become a mini version of Berkshire Hathaway. Guzman y Gomez and Barrenjoey could turn out to be really good investments.
At the last Magellan share price, it had a partially franked dividend yield of 4%.
Brickworks Limited (ASX: BKW)
Brickworks has been one of the most reliable dividend shares in the ASX 200, in my opinion. It hasn’t cut its dividend since the mid 1970s, so that’s very reassuring.
Its two non-construction assets entirely fund the dividend. It owns half of a quality industrial property trust, along with Goodman Group (ASX: GMG).
The planned Amazon distribution centre construction work is well advanced and is due to be completed in September 2021. Major infrastructure works are also proceeding to schedule for the construction of the Coles Group Ltd (ASX: COL) warehouse to start in the early 2021 calendar year.
After the above two facilities are complete, net rental distributions will increase by over 25% and gross assets are expected to exceed $3 billion. After this, there will still be sufficient land remaining to provide at least a further 5-year development pipeline.
The trust, along with the holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, provide a reliable and growing stream of investment income to Brickworks to fund its dividend. WHSP is an investment house that owns a growing portfolio of different assets which funds its own growing dividend.
At the last Brickworks share price, it has a fully franked dividend yield of 3%.
APA Group (ASX: APA)
APA is an infrastructure business that owns a huge gas pipeline throughout Australia, transporting around half of the country’s natural gas.
It has been growing its distribution every year since the mid 2000s. It funds that distribution with its growing operating cashflow. It actually just announced an estimated FY21 half-year distribution of 24 cents per share for the six months ending 31 December 2020. This increase represented a 4.3% increase over the FY20 interim distribution of 23 cents per unit.
What will help grow the distribution in the medium term? APA is investing $460 million to construct a new 580km pipeline in Western Australia to connect emerging gas fields in the Perth Basin to the resource rich Goldfields region, forming an interconnected WA Gas Grid. APA noted that each time it has extended its pipeline in this region, it has received more requests for connection from miners wanting a reliable and affordable energy sources, to add to variable renewable energy sources.
At the last APA share price, it has a distribution yield of 5%.
There are other ASX dividend shares that in ASX 200 that could be worth keeping an eye on such as Bapcor Ltd (ASX: BAP), Collins Foods Ltd (ASX: CKF) and Wesfarmers Ltd (ASX: WES).