I believe there are some wonderful ASX dividend shares that would be good ideas for $1,000.
You may not be able to retire from a single $1,000 investment, but it can get the ball rolling to build enough dividends to generate a good amount of cashflow to your bank account.
So which businesses would make good ideas for dividends? I reckon these two would be good picks for the long term:
Magellan Financial Group Ltd (ASX: MFG)
Magellan’s share price has been drifting lower in recent weeks, down from above $60 to below $50. That has pushed the trailing partially franked dividend yield to 4.5%.
The fund manager’s funds under management (FUM) has been steadily rising over the years, partly from investment performance of the funds and partly thanks to funds inflows. Over the past five years it has received at least a few billion of net inflows and I think that could continue in FY21 and beyond. The growth of FUM is a major driver of net profit, which funds the dividend. I like how Magellan is trying to raise more FUM with attractive offerings for retail investors.
More flows could happen if the retirement product that Magellan has been working on turns into a success. There is a large addressable market here with the large superannuation of pool of money that will be looking for a good return.
I’m very interested by Magellan’s private investment plays. Whilst the new investment bank called Barrenjoey and the Mexican outlet chain Guzman y Gomez may not seem that exciting, it could allow Magellan to be a better investor (and gain real-time insights) whilst also opening up more growth – perhaps it could sort-of turn into a mini Berkshire Hathaway. Either way, the ASX dividend share could keep growing its dividend from multiple growth avenues.
Brickworks Limited (ASX: BKW)
The Brickworks share price has also fallen in recent times, dropping from above $20 to almost $18. That’s despite the Australian economy seemingly going through the beginnings of a recovery from COVID-19 impacts.
Brickworks currently offers a fully franked dividend yield of 3.25%.
Brickworks itself said that its Australian building products division has made a strong start to FY21 with first quarter earnings well ahead of the prior corresponding period. Home builder customers have a solid pipeline of work for the rest of the financial year.
However, in the US things are still difficult for the ASX dividend share with sales being below expectations because of the impact of the pandemic, including the deferral of many projects by state authorities due to financing concerns.
What I’m most excited about with Brickworks is its property trust development activity. At Oakdale West, the construction of the huge, state-of-the-art Amazon facility is well advanced and 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) distribution warehouse to commence in early 2021.
After those two facilities are completed, net rental distributions will increase by over 25% and gross assets held within the property trust are expected to exceed $3 billion. The remaining land should be sufficient to provide at least a further five-year development pipeline. Brickworks is benefiting from the shift towards online shopping, which is fueling demand for prime industrial property. There are discussions underway with several other parties for additional leasing opportunities within the property trust.
The dependable Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) continues to deliver solid earnings, long term growth and a growing dividend for Brickworks.
Summary thoughts
I think both of these ASX dividend shares are dependable ideas with an attractive starting yield and solid growth potential with continuing diversification opportunities. At the current values, I’d probably pick Magellan for the higher yield and impending retirement income product launch.
Other income ideas to consider could be MFF Capital Investments Ltd (ASX: MFF) and, if you’re thinking about ‘alternative’ ideas, then Evolution Mining Ltd (ASX: EVN) could be a left-field choice.
