Why I think these 3 ASX 200 shares would be good dividend picks

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has a number of quality dividend shares that should also be able to deliver long-term profit growth.

I’m looking for dividend shares that have grossed-up yield of at least 5%, here are three that I think could be good picks:

DuluxGroup Limited (ASX: DLX)

DuluxGroup owns a number of home improvement brands including British Paints, Selleys, Yates and Dulux.

The products it sells should be low-costing enough not to be heavily affected by the housing downturn. Indeed, it might encourage people to renovate their home instead of paying for an expensive move.

Australia’s construction boom continues with a growing population, which should supports demand for DuluxGroup products. The total number of dwellings grows every year, which increases DuluxGroup’s total addressable dwelling market.

It currently has a grossed-up dividend yield of 5.1%.

InvoCare Limited (ASX: IVC)

The leading funeral business in Australia has been one of the best and most reliable dividend payers since 2006.

The number of funerals continues to grow because of Australia’s ageing population. Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050.

As long as InvoCare can at least maintain its market share and steadily increase its funeral prices over the long-term it should be a reliable dividend payer for many years to come.

I like, and agree, with the strategy to invest in its locations to appeal to changing preferences for funerals to be celebrations. The idea of acquiring businesses in locations where baby boomers are retiring also seems smart.

It currently has a grossed-up dividend yield of 5.25%.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is one of Australia’s leading fund managers with nearly $73 billion of funds under management (FUM).

Funds management is a very scalable business, so it doesn’t need to hold onto much more cash as it grows FUM – it’s the same investment team whether it’s $75 billion of FUM or $80 billion. That’s why Magellan is going to pay 90% to 95% of its funds management profit out as a dividend going forwards.

It currently has a grossed-up dividend yield of 7.2%.

Foolish takeaway

I believe all three shares could deliver market-beating total returns. At the current prices I’m drawn to InvoCare due to its long tailwinds and its current re-investment strategy.

Another share that could be an excellent dividend choice is this top stock which pays a higher yield than what you can get from the bank and just increased its dividend by 20%.

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You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

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Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited. The Motley Fool Australia has recommended InvoCare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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