2 ASX 200 shares that could be great for dividends

This article is about 2 S&P/ASX 200 Index (ASX:XJO) shares that might be really good options for dividend income, including Amcor (ASX:AMC).

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A row a pink piggy banks ranging in size from small to big, indicating ASX share price and dividends growth CBA bank dividend increase

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There are some S&P/ASX 200 Index (ASX: XJO) shares that might be good options to consider for dividends.

Businesses in the ASX 200 can be large enough to be leaders in their industry, generate reliable earnings and pay solid dividends.

Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT) that has a market capitalisation of $826 million.

It has a farmland portfolio across different farm types including cattle, vineyards, almonds, macadamias and cropping (cotton and sugar).

Rural Funds is one of the ASX 200 shares that have a stated distribution growth target. The ASX 200 dividend share wants to increase the distribution by 4% per annum.

The income growth by the ASX 200 share is achieved through lease indexation, productivity improvements and conversion of assets to higher and better use.

Rental indexation is either linked to CPI inflation, or there’s a fixed 2.5% annual increase. Some of the contracts have infrequent market reviews as well.

Rural Funds’ adjusted net asset value (NAV) per unit has been steadily growing since it listed. It has increased from $1.22 to $2.01 at the time of the FY21 half-year result. The NAV growth reflects productivity and development gains.

The ASX 200 dividend share says that it has existing earnings and balance sheet capacity to fund developments, whilst continuing to fund growing distributions.

Rural Funds has forecast a 11.73 cents per unit distribution in FY22. That translates to a forward distribution yield of 4.8%.

Amcor CDI (ASX: AMC)

Amcor describes itself as a global leader in developing and producing high-quality, responsible packaging for a variety of food, beverage, pharmaceutical, medical-device, home and personal care and other products.

It has 230 sites with 47,000 employees spread across 40 countries.

The ASX 200 business is currently extracting synergies after going through its merger with Bemis in the US.

Amcor continues to grow despite all of the impacts of COVID-19 on the global economy and its respective markets.

In the nine months ending 31 March 2021, it reported earnings per share (EPS) growth of 63% to 43.8 cents. Adjusted EPS grew 16% on a comparable constant currency basis to 51.5 cents.

In that quarterly update, it revealed a quarterly dividend that was higher than that prior corresponding period at 11.75 cents per share.

It’s also going through a share buyback program, which boosts the per-share profit statistic. Approximately 2% of outstanding shares were repurchased in the year to date.

The business recently increased its adjusted EPS growth in constant currency terms to a range of 14% to 15%, up from 10% to 14%.

Amcor CEO Ron Delia said:

Amcor has a clearly defined, consistent capital allocation framework which starts with strong annual free cash flow in excess of $1 billion and growing. We are actively investing in the future, expanding capacity in higher value segments and higher growth markets and increasingly using open innovation and now corporate venturing to identify new avenues of growth. Growth investments like these, along with continued strong execution, will enable continued momentum and reinforce our belief that the Amcor investment case has never been stronger.

Using the last 12 months of dividends, Amcor has a dividend yield of 4.1%.

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Returns As of 15th February 2021
Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Amcor Limited and RURALFUNDS STAPLED. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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