The S&P/ASX 200 Index (ASX: XJO) could be a good option to consider for dividend income over the coming years.
Businesses in the ASX 200 have the potential to be consistent dividend payers whilst also generating operating earnings growth over time.
These two ideas might be considerations:
Rural Funds Group (ASX: RFF)
This real estate investment trust (REIT) owns a portfolio of farming properties. However, it doesn’t operate the properties, it leases them to high-quality tenants like Treasury Wine Estates Ltd (ASX: TWE), Select Harvests Limited (ASX: SHV), Olam, JBS and Australian Agricultural Company Ltd (ASX: AAC).
As the tenants may suggest, its portfolio is spread across cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).
One of the main aims of the REIT is to grow the distribution for shareholders by 4% each year. It achieves this with contracted rental growth as well as productivity improvements at those farms. Examples of those improvements include better water access for cattle and improved irrigation.
The ASX 200 REIT has been steadily growing its distribution for investors for a number of years.
It has provided guidance for the FY22 distribution of 11.73 cents per unit. That translates to a forward distribution yield of 4.6%.
Centuria Industrial Reit (ASX: CIP)
This REIT is the largest one that purely focuses on industrial properties on the ASX. It’s currently rated as a buy by the broker Morgan Stanley with a price target of $3.90.
The ASX 200 share says it has a portfolio of high-quality industrial assets that are situated in key metropolitan locations throughout Australia and is underpinned by a quality and diverse tenant base.
Centuria Industrial REIT is benefiting from a steady increase in the valuation of its portfolio. In the latest external valuations for its portfolio for June 2021, it said that its portfolio had increased in value to $2.9 billion. On a like for like basis, that was an increase of $285 million, up 11% from prior book values.
The two biggest changes in dollar terms were the Telstra Corporation Ltd (ASX: TLS) data centre in Clayton and the large Woolworths Group Ltd (ASX: WOW) facility in Warnervale, which went up $60 million and $38 million respectively.
This led to a pro forma net tangible asset (NTA) increase from $3.33 to $3.85 per unit.
The portfolio has an occupancy rate of 98.8% and a weighted average lease expiry (WALE) of 9.7 years and portfolio capitalisation rate of 4.53%.
Jesse Curtis, the fund manager, said:
Strong sector tailwinds continue to provide long-term benefits to industrial real estate with e-commerce and onshoring increasing demand for quality industrial accommodation. CIP is a beneficiary of the buoyant tenant market with a number of assets delivering valuation gains on the back of strategic leasing.
Morgan Stanley has projected a distribution of 17 cents per unit in FY21, equating to a yield of 4.5%.