2 ASX 200 shares to buy for income
ASX 200 (ASX: XJO) stocks can be a great place to find ASX dividend stocks for income.
Biguh companies can be quoted a little lower in a multiple sense of earnings, thus increasing the dividend yield. These ASX 200 shares may also have a relatively higher dividend payout ratio, also increasing profit.
But I’m not just looking for companies with returns. I also want to find companies with the potential for earnings growth, which gives them a good chance to see the stock price rise and capital gains.
Here are two ASX 200 stocks to consider for income:
Metcash Limited (ASX: MTS)
With its national supply agreements with IGAs and independent alcohol chains across the country, I think Metcash’s food and alcohol income is quite similar to that of Coles Group Ltd. (ASX: COL) and Woolworths Group Ltd. (ASX: WOW) – defensive and has the potential for slow but steady growth over time.
But it is the hardware segment of Metcash that particularly attracts me. He owns Miter 10, Home Timber & Hardware and most of Total Tools’ businesses.
The ASX 200 share has worked in a number of areas of its business to reduce costs, improve profit margins and be more efficient.
The hardware division is an interesting feature of Metcash. Underlying FY21 EBIT increased 61.5% to $ 136 million, while sales increased 24.7%. This shows that the margins are increasing well. In a business update, Metcash said hardware sales in the first 16 weeks of FY22 to August 15, 2021 were up 16.3% from FY21.
It recently increased its target payout ratio from 60% to 70%. Shareholder dividends for the year rose 40% to 17.5 cents per share. The fully franked dividend yield for FY21 is 4.3%.
Magellan Financial Group Ltd. (ASX: MFG)
Magellan is a growing fund manager who now has funds under management (FUM) of approximately $ 117 billion. This amount of FUM has generated large amounts of income and profit.
If the business can simply continue to develop its FUM, it can make more costs and even higher profits. Higher margins can occur because it doesn’t take much (in terms of expenses) to handle an additional $ 1 billion of FUM.
In FY21, ASX 200 share average WUF increased 9% to $ 103.7 billion, management and service fee income increased 7% to $ 635.4 million dollars and profit before taxes and fees from fund management activity increased 10% to $ 526.6 million. That’s a very high profit margin.
With an average FUM of $ 103.7 billion in FY21, the fact that the FUM is already at $ 117 billion shows that the underlying fund’s management profit is likely to grow again.
I also like the investments that Magellan Capital Partners have made like Guzman y Gomez and Barrenjoey which have long term growth potential and also diversify the underlying earnings.
During FY22, Magellan is expected to pay a partially franked dividend of 5.4% at the current Magellan share price. It aims to pay out between 90% and 95% of the fund’s management profits and annual performance fees.