I think there are some really good ASX 200 (ASX: XJO) shares that are contenders for dividend income.
I’m not talking about the typical ideas of National Australia Bank Ltd (ASX: NAB), Telstra Corporation Ltd (ASX: TLS) or Transurban Group (ASX: TCL).
The ASX 200 dividend shares I’m looking at have good growth potential, offer a solid starting yield and are still implementing good dividend increases.
Magellan Financial Group Ltd (ASX: MFG)
Share market values tend to go up over time. Fund managers can easily benefit from that as long as they pick decent shares and don’t suffer from fund outflows (when investors withdraw their money).
Magellan has good growth potential as its funds under management (FUM) continues to grow. It recently reached $110 billion with no signs of stopping. That can continue to drive the profit and dividend higher.
It can also use some of its retained annual profit to invest in other ‘principal investments’ which are external operating businesses opportunities like Barrenjoey and Guzman y Gomez.
At the Magellan share price of around $47, it has a trailing partially franked dividend yield of 4.7%. In the HY21 report Magellan increased the interim dividend by 5%.
It ticks all of the boxes as an ASX 200 dividend share for income, in my opinion.
Brickworks Limited (ASX: BKW)
Brickworks is another idea that is a very reliable income option.
This company hasn’t cut its dividend since the 1970s, so historically it has been one of the most consistent stocks to own for income.
But it’s the future that I’m confident about for Brickworks.
Sure, it has a high-quality portfolio of building product businesses, where it’s one of the market leaders in the country, such as Austral Bricks and Bristle Roofing.
Brickworks also has a very promising future in the USA with a handful of brickmaking businesses. America is a huge market and Brickworks can make a lot of money over there if it can grow profit margins and increase its market share.
But what most excites me about the safety and growth of this ASX 200 dividend share is its long-term investment in Washington H Soul Pattinson and Co Ltd (ASX: SOL) and the 50% stake of a quality industrial property trust.
WHSP has a defensive and diversified portfolio of assets that continue to generate solid cashflow and pay dividends to WHSP. The investment house has used that money to keep growing the dividend to shareholders (like Brickworks) as well as making more investments.
The industrial property trust is a very solid idea. Excess Brickworks land is sold into the trust. Then partner Goodman Group (ASX: GMG) prepares the land for the construction of very useful industrial like warehouses. Two of the warehouses that are currently being built, which are huge, are for Amazon and Coles Group Ltd (ASX: COL). When they’re complete it should significantly increase the rental profit and value of the property trust. This should continue Brickworks’ excellent ASX dividend share record.
The latest Brickworks share price equates to a fully franked dividend yield of 2.9%.
In the FY21 interim result it also implemented a 5% dividend increase.
I believe that the above two ASX dividend shares are among the best options in the ASX 200.
