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3 ASX cash generating champions

One of that main things to consider as an investor is how will your shareholdings deliver returns to you?

The easiest way is probably through dividends or distributions from profits. A company that holds onto the money is taking a risk of burning it on a wasteful project.

These three ASX shares are well-known for delivering cash returns to shareholders:

Magellan Financial Group Ltd (ASX: MFG)

Fund manager Magellan has adopted a new dividend policy of paying out 90% to 95% of the net profit after tax of the company’s funds under management (FUM) business, excluding performance fees. It will also pay a dividend of 90% to 95% of annual net crystallised performance fees after tax. This is a great way to distribute returns to shareholders.

With Magellan’s funds continuing to outperform its benchmarks over the long-term, it will likely keep attracting FUM at a high rate, which should keep growing the management fees at a good rate.

Based on the last year of dividends, Magellan has a mostly-franked dividend yield of 4.6%.

Cromwell Group (ASX: CMW)

Cromwell is one of the largest property businesses on the ASX. It offers property funds and also directly owns properties.

I like the diversification offered by Cromwell’s different properties, I like the fact that over a third of tenant income is from government sources and I like that Cromwell’s total operating profit is growing over the long-term. I am quite intrigued by the recent tilt towards senior living as well.

With distribution guidance of 7.25 cents per security for FY19, it has a forward yield of 6.7%.

Transurban Group (ASX: TCL)

Transurban is a cash-generating cow, being one of the world’s largest toll road operators. The toll roads in each of the cities it operates in are seeing higher traffic every year and Transurban can also steadily increase the price of the toll.

The company also has several large projects on the go, so Transurban is under pressure to deliver on time and on budget, but once the projects like WestConnex are completed there could be significantly higher distributions being paid to shareholders, assuming usage of toll roads keeps rising.

However, Transurban does have a high level of debt on its balance sheet, so that’s a risk if interest rates keep rising over time.

Transurban has guided a FY19 distribution of 59 cents, which translates to a distribution yield of 4.7%.

Foolish takeaway

Each of these businesses are good dividend ideas. At the current stage in the cycle, I would prefer to own Magellan shares compared to the other two. The franking credits of Magellan are a big boost to the potential income.

However, if you’re looking for income, I would much prefer to invest in one of these leading ASX dividend stocks.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Transurban Group. 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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