I believe that these two ASX 200 dividend shares in the ASX 200 (ASX: XJO) would be great picks for income.
In this era of ultra low interest rates, it’s really difficult to find anything that’s paying a decent yield. So many assets have seen their prices pushed up too, making the yield lower.
So what ASX 200 income shares are worth looking at for dividends? I believe these two picks would be good for the long-term:
Brickworks Limited (ASX: BKW)
Brickworks has proven itself as one of the best dividend shares on the ASX. It’s been doing it for decades. The business hasn’t cut its normal dividend in 45 years, that’s a record going back to 1976.
In the half-year result announced this week, Brickworks increased the interim dividend again by 5% to 21 cents per share.
Brickworks actually looks good value to me. It has an investment in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) worth $2.9 billion, a 50% share of an industrial property trust with a net asset value of $777 million, its building products division in Australia has net tangible assets of $692 million and the North American division has net tangible assets of $208 million.
After including net debt of $479 million, it has a total inferred asset backing of $4.1 billion, or $27.23 per share. The share price is at a 37.5% discount to this at the time of writing. Also, keep in mind that management said that the building products asset value includes some parcels of surplus land, currently held at book value, but with a significantly higher market value.
I covered the Brickworks result in some detail, including the promising outlook for the building products divisions in both Australia and the US.
WHSP continues to pay Brickworks higher dividends and the property trust has a particularly promising pipeline. It’s building large warehouses for Coles Group Ltd (ASX: COL) and Amazon and there is still significant land for further development at each of its estates, with significant lease pre-commitments already secured. The completion of these facilities over the next two years will result in gross rent within the trust growing by around $38 million – a 40% increase from the current level.
Brickworks currently offers a fully franked yield of 3%.
Magellan Financial Group Ltd (ASX: MFG)
Magellan is one of Australia’s biggest fund managers, with Hamish Douglass at the helm of the global equity investment strategy.
Its focus is on delivering solid long term returns for investors, whilst providing good protection during market falls. The global equity portfolios have performed well over the long term, but performance since the COVID-19 crash has been mixed, but investments in businesses like Alphabet, Microsoft, Netflix and Yum! Brands are likely to prove solid performers over the long-term from here in my opinion.
I think that Magellan can continue to attract new funds under management (FUM), whilst delivering good net returns. This should lead to rising funds management profits because of how profitable and scalable it is.
There are a number of other growth areas that Magellan could deliver attractive returns for shareholders. It’s launching new products, such as ETFs and hopefully a retirement product, it is making investments in private businesses such as Barrenjoey and Guzman y Gomez and it continues to try to think of innovative ways to serve clients through partnership offerings.
Magellan’s recent HY21 result included a 5% increase of the ordinary dividend to 97.1 cents per share. Based on that, it has a trailing partially franked dividend yield of 4.8%.
Summary thoughts
I think both of these ASX 200 dividend shares are good options for income. Brickworks clearly has an excellent, stable dividend record for shareholders with plenty of growth potential thanks to its property trust. Magellan becomes more diversified each year and continues to pay a solid dividend. I’d be happy to buy both of them right now.
There are also other ASX dividend shares that I like the look of outside of the ASX 200.